/raid1/www/Hosts/bankrupt/TCRLA_Public/250306.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
Thursday, March 6, 2025, Vol. 26, No. 47
Headlines
A R G E N T I N A
ARGENTINA: Economy Beat Expectations Again in December
ARGENTINA: Flooding the Zone Might Drown the Milei Administration
ARGENTINA: Neuquen Province Ponders Bond Sale After Investor Meets
TELEFONICA SA: Posts EUR49MM Loss on Latin America Write-Offs
B R A Z I L
MOVIDA PARTICIPACOES: S&P Affirms 'BB-' ICR, Outlook Stable
C O S T A R I C A
INSTITUTO COSTARRICENSE: Fitch Alters Outlook on 'BB' IDRs to Pos.
E L S A L V A D O R
THIRTEENTH MORTGAGE: Fitch Hikes Rating on Class A Notes to 'B+sf'
P U E R T O R I C O
LIBERTY COMMUNICATIONS: Moody's Cuts CFR to 'B3', Outlook Stable
T R I N I D A D A N D T O B A G O
CARIBBEAN AIRLINES: TTALPA Wants Intervention in Salary Dispute
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Economy Beat Expectations Again in December
------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
Argentina's economy expanded more than expected in December,
solidifying the country's bounceback in the last quarter of the
year under President Javier Milei's watch.
Economic activity rose 0.5% from November, more than the 0.2%
median estimate of economists surveyed by Bloomberg. Monthly growth
beat expectations the previous month, too, according to
globalinsolvency.com. From a year ago, the gross domestic product
proxy grew 5.5%, compared with the median estimate of 3.5%,
according to government data published, 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 Feb. 17, 2025, S&P Global Ratings lowered its local currency
sovereign credit ratings on Argentina to 'SD/SD' from 'CCC/C' and
its national scale rating to 'SD' from 'raB+'. At the same time,
S&P affirmed its 'CCC/C' foreign currency sovereign credit ratings
on Argentina. The outlook on the long-term foreign currency rating
remains stable.
On Jan. 8, 2025, Moody's Ratings raised Argentina's local currency
ceiling to B3 from Caa1 and the foreign currency ceiling to Caa1
from Caa3. Moody's said the decision to raise the local and
foreign currency ceilings reflects the increased predictability and
the greater consistency in economic policy that has led to a rapid
reduction in monetary and fiscal imbalances that were stoking very
high inflation.
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.
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: Flooding the Zone Might Drown the Milei Administration
-----------------------------------------------------------------
Buenos Aires Times reports that in the past couple of weeks,
Argentina's government delivered two of the best pieces of economic
data from President Javier Milei's tenure to date: January's
inflation, at 2.2 percent, was the lowest monthly rate in almost
five years; economic growth in December, at 5.5 percent, was well
above market expectations and the strongest in almost three years.
This is what most Argentines voted for Milei to do: lower inflation
and make the economy grow, according to Buenos Aires Times. It is
as simple as that. But instead of focusing its messaging on that
primary goal, now that it has good results to show, the Milei
administration is making news from other, less pleasing aspects of
the public agenda - aloof to the fact that most of its voters
either don't care or detest them, or even worse, didn't care until
they found out, the report notes.
Alt-right strategists talk about "flooding the zone." They
repurposed the expression from American football, where it means
sending multiple receivers to one side of the field to force the
defence to tilt that way, the report relays. In political
communications, spin doctors claim that if one floods the field
with outrageous information, the public is dumbstruck, unable to
react to any of it, the report says. This, of course, is if the
public are tuned 24/7 to whatever the government says or Milei
posts on social media, the report notes.
This theory is not different from the time-old mantra that "no
publicity is bad publicity." It might serve a purpose for a while
when you are unknown, but once people know who you are and what
your track record is, it might be better to pace public appearances
- or, in the new jargon, to instead "starve the zone" a bit, the
report discloses.
The information the Milei administration put out does not
necessarily play in the President's favour, the report relays. In
a desperate effort to steer away from the crypto-scam scandal that
involves him personally and has tarnished his reputation worldwide,
the government voted against Ukraine at the United Nations (this
after Milei had promised full support to Volodymyr Zelenskyy),
complained about a potential monopoly the President had previously
praised and appointed two Supreme Court justices by decree,
triggering immediate opposition outrage, the report notes.
The risk with "flooding the zone" is that you might drown yourself.
Argentines voted for Milei in 2023 despite - not because of - his
aggressiveness, vulgarity, and pretentiousness, trusting that his
outsider status would separate him from a useless and disconnected
political establishment and that his economic knowledge would fix
endemic inflation, the report discloses.
The daily management of Milei's economy is in the hands of a group
of people led by Economy Minister Luis Caputo, who, by contrast,
seem down-to-earth and unassuming. They are leading a negotiation
with the International Monetary Fund (IMF) that will make or break
the Milei government, the report says.
Caputo and his team should be credited for having convinced Milei
that his campaign promise of dollarising the economy did not make
sense, especially without having the dollars to do it, the report
relays. They also achieved an unexpected fiscal surplus, one
higher than even the IMF would have hoped for, the report says.
But Argentina's economic team is aware that certain inconsistencies
are building in the economy and that there isn't much room for
unforced errors, the report relays. Milei's rock-star global
personality has so far played in favour of the economic program,
but Caputo knows from experience from his time with the Mauricio
Macri administration that not all publicity is good publicity when
it comes to dealing with moody financial markets, the report
notes.
The one thing the IMF wants from Caputo and his team is for the
country's economic program to flood the Central Bank with foreign
reserves, which is the cash that would later be used to repay debt,
the report discloses. This has not been happening in the last
eight months and net reserves currently stand at around US$4
billion in the negative, the report relates. Caputo's team wants
the IMF to take a (new) leap of faith in the country and disburse
more cash to fill that gap. The IMF is thinking about it, the
report relays.
Flooding is also the opposite of what happened in the Argentine
pampa this season, meaning crop forecasts have been trimmed - if
only slightly - and the inflow of farming sector dollars this year
will be weaker than in 2024, the report recalls. The appreciation
of the peso and low international prices dissuade farmers from
selling their produce, something the government has tried to offset
by temporarily lowering export duties, the report says.
Despite the recent good news, the fragility of Argentina's economy
demands sobriety and steadiness - something that zone-flooders may
lack as they attempt to sow confusion, the report notes. What
worked until now will not necessarily work from now on, 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 Feb. 17, 2025, S&P Global Ratings lowered its local currency
sovereign credit ratings on Argentina to 'SD/SD' from 'CCC/C' and
its national scale rating to 'SD' from 'raB+'. At the same time,
S&P affirmed its 'CCC/C' foreign currency sovereign credit ratings
on Argentina. The outlook on the long-term foreign currency rating
remains stable.
On Jan. 8, 2025, Moody's Ratings raised Argentina's local currency
ceiling to B3 from Caa1 and the foreign currency ceiling to Caa1
from Caa3. Moody's said the decision to raise the local and
foreign currency ceilings reflects the increased predictability and
the greater consistency in economic policy that has led to a rapid
reduction in monetary and fiscal imbalances that were stoking very
high inflation.
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.
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: Neuquen Province Ponders Bond Sale After Investor Meets
------------------------------------------------------------------
Kevin Simauchi at Bloomberg News reports that Argentina's Neuquen
Province is mulling a bond sale after meeting with fixed-income
investors late last year, according to a person familiar with the
matter.
State officials made presentations to funds including Blackrock and
Neuberger Berman in New York and London during the months of
October and November, the person added, asking not to be named
discussing deliberations that are private, according to Bloomberg
News. Spain-based lender Santander helped to arrange the meetings,
Bloomberg News relays.
Spokespeople from the two asset managers declined to comment, while
Santander didn't immediately respond.
For now, any sale remains on hold as authorities assess their
financing needs and watch for how markets react to a potential
federal government deal with the International Monetary Fund, the
person said, Bloomberg News notes.
The considerations come against a backdrop of mounting optimism
over Argentina's economy, its growth trajectory and Neuquen's own
popularity with investors, Bloomberg News says. The Patagonian
province is front-and-centre of Argentina's shale oil industry,
Bloomberg News discloses.
Its bonds due in 2030, secured by oil and gas royalties, change
hands at 102 cents on the dollar, according to Bloomberg-compiled
pricing data. Unsecured debt with the same maturity trades at some
96 cents on the dollar, Bloomberg News says.
Neuquen's plans, while preliminary, mark the third Argentine
regional government that's looking at a potential return to
international bond markets, Bloomberg News notes. Buenos Aires
City and Cordoba Province are each considering the sale of around
$500 million of bonds between March and May, Bloomberg reported.
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 Feb. 17, 2025, S&P Global Ratings lowered its local currency
sovereign credit ratings on Argentina to 'SD/SD' from 'CCC/C' and
its national scale rating to 'SD' from 'raB+'. At the same time,
S&P affirmed its 'CCC/C' foreign currency sovereign credit ratings
on Argentina. The outlook on the long-term foreign currency rating
remains stable.
On Jan. 8, 2025, Moody's Ratings raised Argentina's local currency
ceiling to B3 from Caa1 and the foreign currency ceiling to Caa1
from Caa3. Moody's said the decision to raise the local and
foreign currency ceilings reflects the increased predictability and
the greater consistency in economic policy that has led to a rapid
reduction in monetary and fiscal imbalances that were stoking very
high inflation.
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.
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.
TELEFONICA SA: Posts EUR49MM Loss on Latin America Write-Offs
-------------------------------------------------------------
Buenos Aires Times reports that Spanish telecoms giant Telefonica
reported an annual loss for the second straight year, weighed down
by write-offs from the sale of several subsidiaries in Latin
America.
The company booked a net loss of 49 million euros (US$51 million)
last year, narrowing from a net loss of 892 million euros in 2023,
when it took a hit from writing down the value of its British unit
Virgin Media O2 (VMO2), according to Buenos Aires Times.
Without these extraordinary items, the group would then have made a
profit of 2.37 billion euros, the report notes.
Telefonica said the 2024 results reflected the depreciation of its
assets in Latin America, where it is reducing its exposure to
market volatility in the region, the report relays.
It booked write-offs of 1.27 billion euros in Argentina, 397
million in Chile and 108 million in Peru, the report notes.
But it said full-year revenue had risen 1.6 percent to 41.3 billion
euros, above its target of revenue growth of around one percent,
the report discloses.
Analysts polled by Factset had predicted full-year revenues of
40.96 billion euros, the report says.
These are "very favourable results," Laura Abasolo, the group's
chief financial officer, said at a press conference. She said she
expected the operator's turnover to rise again in 2025, despite a
"complex" economic environment, the report relays.
"We maintained momentum in our key markets, Spain, Brazil, Germany
and Britain, with solid cash generation," argued Telefonica's chief
president Marc Murtra, who was appointed to the post just last
month, the report says.
The company has launched a strategic shift toward these four
markets in a bid to reduce its debt and bolster profitability, the
report notes.
Telefonica agreed to sell its subsidiary in Argentina for US$1.2
billion to Telecom Argentina SA, prompting the government of
President Javier Milei to announce an investigation over
competition concerns, the report relays.
It has also recently sold its subsidiaries in Guatemala and Costa
Rica and concluded a deal to cede its Colombian branch, the report
says.
Telefonica has been through a turbulent period since Saudi group
STC took a 9.9-percent stake in September 2023, the report
discloses.
That led the Spanish state to re-enter the group's capital to
defend its "strategic" role of providing services to the country's
armed forces, the report adds.
About Telefonica SA
Headquartered in Madrid, Spain, Telefonica SA operates as a
telecommunications company.
As reported in the Troubled Company Reporter-Latin America on
Feb. 10, 2025, Egan-Jones Ratings Company on January 7, 2025,
maintained its 'BB-' foreign currency and local currency senior
unsecured ratings on debt issued by Telefonica SA. EJR also
withdrew the rating on commercial paper issued by the Company.
===========
B R A Z I L
===========
MOVIDA PARTICIPACOES: S&P Affirms 'BB-' ICR, Outlook Stable
-----------------------------------------------------------
S&P Global Ratings affirmed its global and national scale ratings
on Movida Participacoes S.A. at 'BB-' and 'brAA+', respectively.
S&P said, "The stable outlook reflects our view that Movida will
remain focused on efficiency measures to balance out the effects of
high interest rates. On top of our expectations for the company's
EBIT interest coverage, we see its funds from operations (FFO) to
debt at 20% in the next two years.
"In addition, we affirmed our 'brAA+' issue-level rating on the
company's senior unsecured debentures and our 'BB-' issue-level
rating on its senior notes. The recovery ratings are unchanged at
'3', indicating our expectation of meaningful recovery (rounded
estimate: 65%) in the event of a default."
Brazil's high -- and rising -- basic interest rate will continue to
weigh on Movida's balance sheet.
S&P said, "We estimate that Movida had approximately Brazilian real
(R$) 19 billion in gross debt at the end of 2024, compared with
R$14.8 billion at the end of 2023. The added debt was mostly to
support new contracts in the fleet management business and the
rent-a-car (RaC) segment's larger fleet size.
"From 2025 on, we forecast mild debt increases, as well as Movida
financing capex mostly with internal cash flows. Still, sustained
high debt levels -- which we see at roughly R$20 billion in the
next two years -- in addition to elevated interest rates will
significantly increase the company's interest burden and pressure
its cash flows despite the expected decrease in capex in coming
years.
"Given our economists' forecast of a 14% average basic interest
rate in Brazil in 2025 and a 13.6% average rate in 2026, Movida's
debt cost will be R$2.5 billion-R$3 billion in 2025 and 2026,
versus about R$2 billion in 2024.
"We expect stable EBIT interest coverage in the next two years at
roughly 1.5x, with efficiency measures compensating for the high
interest burden. We believe Movida will continue to focus on
efficiency measures in 2025; we think it will raise the average
occupancy rate for RaC to 80%-85% from 75%-80% in 2024 by aligning
fleet size to demand. Our forecast assumes a net reduction of
10,000-15,000 cars in the RaC segment throughout this year.
"We also expect that Movida will continue to prioritize tariff
increases--we forecast RaC tariffs increasing by an average of 10%
in 2025 and 5% in 2026. For long-term fleet management (known as
GTF), tariffs are expected to rise almost 17% in 2025, after rising
20%-25% in 2024, because of contract renegotiations and the higher
average price of vehicles. This is while the segment maintains an
occupancy rate of 95%-98% of the total fleet.
"All of that said, the EBIT interest coverage that we currently
expect for the next two years (1.5x) is weaker than what we
previously expected for 2025 (1.7x) and 2026 (1.9x). We now
forecast FFO to debt of roughly 20% in 2025-2026, down from our
previous forecast of 20%-25%.
"Liquidity will remain comfortable amid lower capex and controlled
debt amortization in the next 12 months. We forecast net capex of
about R$1.2 billion in 2025, mostly for fleet renewals and new
contracts in fleet management. Importantly, the lower net capex
that we expect for this year assumes a higher average price of
vehicles sold due to higher inflation and a depreciation of the
Brazilian real (which generally affects the prices of new
vehicles).
"Additionally, we assume that Movida ended 2024 with almost R$4
billion in cash and R$2 billion of short-term debt.
"We think the company will keep working on liability management so
that it can extend its debt maturity profile and reduce its cost of
debt. The next relevant debt maturities are in 2026 (about R$2.7
billion) and in 2027 (R$3.5 billion), which we expect the company
to refinance in advance.
"We view Movida as a highly strategic subsidiary of Simpar S.A. We
believe Movida is very important to the group's long-term strategy,
and it's highly unlikely that it will be sold. Based on historical
evidence, we expect Simpar to provide support to Movida under
almost all foreseeable circumstances. In 2018, for instance, Simpar
increased its stake in Movida through a capital raise."
After it was acquired back in 2013, Movida was linked to the
parent's long-term strategy of increasing its diversification in
strategic sectors, following its existing fleet management
operations for trucks and other heavy vehicles. Still, Movida's
operations are managed independently--its executives and
administrative functions are different from those at Simpar--and
S&P doesn't view it as closely linked to the group's name and
brand.
S&P said, "The stable outlook reflects our expectation that Movida
will focus on increasing its operational efficiency to compensate
for its sustained high interest levels. In our view, the company
will finance future growth mostly from operating cash flows, not by
incurring significant additional debt. However, the elevated
interest burden will continue to weigh on its credit metrics over
the next two years. We expect EBIT interest coverage of close to
1.5x and FFO to debt approaching 20% in 2025 and 2026.
"We could lower the ratings if the company fails to deliver the
expected operating cash flows in the next 12-18 months to partly
offset the high interest burden. In this scenario, its credit
metrics will depart from our base case, with EBIT interest coverage
below 1.3x and FFO to debt below 20% on a sustained basis.
Although it's unlikely in the next 12-18 months, we could upgrade
"Movida in the long term if it continues to increase the fleet
management segment's share of cash flow, without incurring
substantial additional debt. In this scenario, we would see FFO to
debt comfortably above 20% and EBIT interest coverage of about 2.0x
on a consistent basis.
"Still, an upgrade would also depend on an upgrade of Movida's
parent company, Simpar (global scale BB-/Stable/--; national scale
brAA+/Stable/--), which we believe is unlikely in the
short-to-medium term with high interest rates pressuring Simpar's
credit metrics."
===================
C O S T A R I C A
===================
INSTITUTO COSTARRICENSE: Fitch Alters Outlook on 'BB' IDRs to Pos.
------------------------------------------------------------------
Fitch Ratings has affirmed Instituto Costarricense de Electricidad
y Subsidiarias' (ICE) Long-Term Foreign Currency and Local Currency
Issuer Default Ratings (IDRs) at 'BB' and the senior unsecured
bonds at 'BB'. The Rating Outlook for the IDRs has been revised to
Positive from Stable.
In addition, Fitch has affirmed ICE's National Long-Term Rating at
'AA+(cri)' and its senior unsecured local notes at 'AA+(cri)'.
ICE's consolidated Standalone Credit Profile (SCP) is 'bb-'. The
National Scale Outlook is Stable.
ICE has a strong link with the government of Costa Rica
(BB/Positive), given its strategic importance to the country and
the potential socio-political and financial implications that could
arise from any financial difficulty of the company. The ratings
also incorporate ICE's diversified asset portfolio, moderate
capital investment program, and strong market position in both the
electricity and telecommunications sectors.
Key Rating Drivers
Sovereign Equalization Drives Outlook: ICE is an autonomous entity
whose ratings and outlook are directly influenced by its strong
connection and ownership by the Costa Rican government. Costa Rica
plays a role in authorizing the company's capex and debt issuances,
supporting ICE's monopolistic control over the country's
electricity sector and 40% control of national telecommunications
services.
Per the "Government-Related Entities Rating Criteria," Fitch views
government support as 'virtually certain' for the company,
resulting in a score of 50 out of 60. A default event at ICE would
have a very strong negative impact on the sovereign regarding the
availability and cost of financing.
Projected Negative FCF, Stable Leverage: Fitch expects negative FCF
during a higher capex program through 2027, with leverage reaching
but not exceeding 4.5x due to additional debt. Capex spending will
average CRC560 billion per year, or an elevated 36% of revenue, and
will be financed with cash flow and an additional CRC420 billion in
new debt (a 20% increase over YE 2024 levels).
Over half of the total capex spend will modernize the electricity
generation and distribution system, and the balance will fund
telecommunications improvements. Fitch's base case anticipates that
ICE's leverage will not exceed 4.5x amid concurrent annual revenue
growth of 5%, in line with the growth in electricity demand, and
driven mostly by higher residential consumption due to extreme
heat.
Improved Regulatory Transparency: Fitch views the tariff-setting
process as having been reformed for greater clarity. The tariffs
are supported by a non-partisan regulator, using inputs from the
company. Information and inputs are derived from the company's
transparent audited financial statements and accounting records.
Tariffs are adjusted at least once a year and accounted in the
company's operating costs as well as the variable generation costs
(CVG). They also ensure a return on investment.
Diversified Asset Portfolio: ICE is a vertically integrated
monopoly in the electricity sector and the country's incumbent
telecommunications operator. ICE accounts for nearly 75% of the
installed capacity of the National Electric System and generates
85% of total electricity. ICE's postpaid mobile market share in
terms of subscribers is around 44%, according to the latest data
from the Telecommunications Superintendency. The ratings reflect
the company's low business risk, derived from its business
diversification and positive characteristics as a semi-monopolistic
public services provider.
Derivation Summary
ICE's linkage to the sovereign is similar to that of integrated
utility Comision Federal de Electricidad (CFE; BBB-/Stable), whose
rating mirrors that of the Mexican sovereign. CFE's strategic
importance to Mexico, and the potentially significant negative
socio-political and financial implications of any financial
distress at the company, results in a very strong incentive and
responsibility of the Mexican government to support the company.
Fitch projects that ICE's leverage will remain at a structural
average of 4.5x, underpinning the 'bb-' SCP. This is weaker than
Panamanian peer Refinadora Costarricense de Petróleo S.A. (Recope,
AA+(cri)/Stable) at 3.3x.
Key Assumptions
- ICE remains important to the government as a strategic asset for
the country;
- Electricity demand drives the majority of revenue, approximating
to 3% yoy GDP growth;
- Leverage of 4.0x-4.5x in 2025-2027;
- Capex spending of CRC1.9 billion 2025-2027;
- Year-end cash averaging around CRC500 million through 2027;
- ICE's telecommunications market share remains dominant.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A sovereign downgrade;
- A weakening of the link between ICE and the sovereign, and a
material deterioration of ICE's operating and financial profile;
- Regulatory intervention that negatively affects the company.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of the sovereign's ratings.
Liquidity and Debt Structure
ICE's liquidity position is adequate, with a cash and equivalents
balance of approximately of CRC645 billion as of 3Q24 and total
debt of CRC1.984 billion. ICE's expects debt to increase for capex
financing by 20% over current levels in the next three years,
primarily to fund electricity segment projects.
Issuer Profile
ICE is a government-owned, vertically integrated monopoly in the
electricity industry, in charge of developing, constructing and
operating an electric power generation, transmission and
distribution system. It is also the incumbent player in the
telecommunications industry.
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
ICE has an ESG Relevance Score of '4' for Governance Structure and
Group Structure due to ownership concentration, as a majority
government-owned entity and due to the inherent governance risks
that arise with a dominant state shareholder. This has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Instituto Costarricense
de Electricidad y
Subsidiarias LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AA+(cri) Affirmed AA+(cri)
senior unsecured LT BB Affirmed BB
senior unsecured Natl LT AA+(cri) Affirmed AA+(cri)
=====================
E L S A L V A D O R
=====================
THIRTEENTH MORTGAGE: Fitch Hikes Rating on Class A Notes to 'B+sf'
------------------------------------------------------------------
Fitch Ratings has affirmed the 'Bsf' rating for the series B notes
issued by Fifteenth Mortgage-Backed Notes Trust (Trust 15), while
it has upgraded the series A notes from Thirteenth Mortgage-Backed
Notes Trust (Trust 13) and Trust 15 to 'B+sf' from 'Bsf', and the
series C notes from Trust 15 to 'Bsf' from 'B-sf'. The Rating
Outlook is Stable for all the ratings. Fitch has also affirmed the
rating for La Hipotecaria El Salvadorian Mortgage Trust 2016-1
certificates at 'AA+sf' with a Stable Outlook.
The upgrade to 'B+sf' for the series A notes from Trust 13 and
Trust 15 follows the upgrade of El Salvador's Country Ceiling (CC)
to 'B+' and the recent RMBS criteria update reflecting the new
assumptions for the country, as a consequence of the sovereign
upgrade, which allowed the increase of the structured finance
maximum achievable rating in El Salvador (also B+sf). The upgrades,
including the one for the Trust 15 series C notes, also consider
the increase in credit enhancement (CE), which allowed these notes
to be rated one notch higher.
Entity/Debt Rating Prior
----------- ------ -----
Thirteenth
Mortgage-Backed
Notes Trust
A PAL3008861A4 LT B+sf Upgrade Bsf
La Hipotecaria El
Salvadorian Mortgage
Trust 2016-1
2016-1 50346VAA7 LT AA+sf Affirmed AA+sf
Fifteenth
Mortgage-Backed
Notes Trust
A LT B+sf Upgrade Bsf
B LT Bsf Affirmed Bsf
C LT Bsf Upgrade B-sf
KEY RATING DRIVERS
RMBS Transactions
Trust 13, Trust 15
Country of Assets Determine Maximum Achievable Ratings: El
Salvador's Country Ceiling was upgraded to 'B+' from 'B'. According
to Fitch's "Structured Finance and Covered Bonds Country Risk
Rating Criteria," the ratings of structured finance notes cannot
exceed the CC of the country of the assets, unless the transfer and
convertibility (T&C) risk is mitigated.
While the series A notes of the RMBS transactions could have
sufficient CE to be rated above the country's Issuer Default Rating
(IDR), the T&C risk is not mitigated. As such, the ratings remain
constrained by the country ceiling and ultimately linked to El
Salvador's Long-Term IDR. The ratings are also constrained to the
structured finance maximum achievable rating for El Salvador, which
is 'B+sf'.
Operational Risk Mitigated (Latin America RMBS Rating Criteria):
Grupo ASSA, S.A. (BBB-/Stable; primary servicer) has hired La
Hipotecaria S.A. de C.V. (LHES) (sub-servicer) to be the servicer
for the mortgages. Fitch has reviewed LHES's systems and procedures
and is satisfied with its servicing capabilities. In addition,
Banco General S.A. (BBB-/Stable) has been designated as a backup
servicer in order to mitigate the exposure to operational risk and
will replace the defaulting servicer within five days of a servicer
disruption event.
Trust 13
Transaction Performance Supports Upgrade: CE for series A notes has
increased since Fitch's last review due to the sequential nature of
the structure. As of December 2024, CE has increased to
approximately 23.9%, up from 22.8% observed from last review for
the series A notes.
The series A notes also benefit from reserve accounts equivalent to
1.0625% of the outstanding balance of the series A notes, covering
almost 3x their next interest payment and senior expenses. Fitch
has modeled the transaction and the results support the upgrade of
class A to 'B+sf', which is now the maximum achievable rating for
structured finance in El Salvador.
Frequency of Foreclosure Revised: Under Fitch's assumptions in a
'B+sf' scenario, the series A notes would need to support a WAFF of
33.0% and a WALGD of 33.3%, compared with a WAFF of 32.3% and a
WALGD of 34.3% from the previous review, at the same level. These
assumptions consider the main characteristics of the assets, where
OLTV is 87.1%, the seasoning average is 140 months, the remaining
term is 207 months, the WA current loan-to-value ratio is 68.2%,
and the majority of performing borrowers (57.6%) pay through a
payroll deduction mechanism.
The assumptions also consider a Performance Adjustment Factor of
0.7x considering the historical performance of the portfolio.
Trust 15
Transaction Performance Supports Upgrade: CE has increased during
the last year due to the sequential nature of the structure and the
current CE for the A and C notes are consistent with 'B+sf' and
'Bsf' ratings, respectively, supporting an upgrade to these
classes. Results are still consistent with 'Bsf' for class B. As of
December 2024, CE has increased approximately 21.0%, up from 19.6%
observed in the last review for the series A notes, up 10.8% from
8.6% observed in the last review for the series B notes, and up
7.3% from 5.4% for the series C notes.
A few factors contributed to this increase, such as stability in
the excess spread and good asset performance. The series A notes
and the series B notes also benefit from reserve accounts
equivalent to 3x their next interest payment in the form of a
letter of credit.
Frequency of Foreclosure Revised: Under Fitch's assumptions in a
'B+sf' scenario, the series A notes would need to support a WAFF of
28.9% and a WALGD of 46.1%, compared with a WAFF of 28.4% and a
WALGD of 46.9% from the previous review in March 2024, at the same
level.
For the B and C notes, at a 'Bsf' level it would need to support a
WAFF of 14.0% and a WALGD of 31.6%, compared with a WAFF of 14.0%
and a WARR of 32.8% from the previous review, at the same level.
These assumptions consider the main characteristics of the assets,
where OLTV is 87.3%, the seasoning averages 113 months, the
remaining term is 239 months, the WA current loan-to-value ratio is
73.2%, and the majority of performing borrowers (61.8%) pay through
a payroll deduction mechanism.
The assumptions also consider a Performance Adjustment Factor of
0.7x considering the historical performance of the portfolio.
CLN Transactions
La Hipotecaria El Salvadorian Mortgage Trust 2016-1
DFC's Credit Quality Supports Rating: The rating assigned to the La
Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates is
commensurate with the credit quality of the guarantee provider. The
credit quality of U.S. International Development Finance
Corporation (DFC) is directly linked to the U.S. sovereign rating
(AA+/F1+/Stable) as guarantees issued by, and obligations of, DFC
are backed by the full faith and credit of the U.S. government,
pursuant to the Foreign Assistance Act of 1969.
Reliance on DFC Guaranty: Fitch assumes the payment on the
certificates will rely on the DFC guaranty. Through this guaranty,
DFC will unconditionally and irrevocably guarantee the receipt of
proceeds from the underlying notes in an amount sufficient to cover
timely scheduled monthly interest amounts and the ultimate
principal amount on the certificates.
Ample Liquidity: The certificates benefit from liquidity in the
form of a five-day buffer between payment dates on the underlying
notes and payment dates on the certificates. In addition, the
certificates benefit from liquidity in the form of an interest
reserve account or a letter of credit at the underlying note level.
Fitch considers this sufficient to keep debt service current on the
guaranteed certificates until funds under a claim of DFC are
received.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The ratings of the Trust 13 series A notes and the Trust 15 series
A, B and C notes could be downgraded in the case of severe
increases in foreclosure frequency as well as reductions in
recovery rates. The series C notes would decrease one notch if
there is an increase in defaults higher than 30%, combined with a
30% decrease in recoveries. Also, ratings could be downgraded if El
Salvador's CC level or the maximum achievable ratings in the
structured finance cap changes.
In the case of the La Hipotecaria El Salvadorian Mortgage Trust
2016-1 certificates, the assigned rating could be downgraded if
there's a negative change in the perception of the credit quality
of DFC, which is directly linked to the U.S. sovereign rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The ratings of the Trust 13 series A notes and the Trust 15 series
A notes are currently capped at El Salvador's CC level. These
ratings could only be upgraded if El Salvador's CC and the
structured finance cap are upgraded. The Trust 15 series B and C
notes can be upgraded if the notes present a higher CE that can
withstand higher stresses, consistent with a 'B+sf' rating.
In the case of the La Hipotecaria El Salvadorian Mortgage Trust
2016-1 certificates, the assigned rating could be upgraded if
there's a positive change in the perception of the credit quality
of DFC, which is directly linked to the U.S. sovereign rating.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
- The ratings of the Trust 13 series A notes and Trust 15 series A
notes are driven by El Salvador's credit quality as measured by its
CC and limited by the structured finance cap.
- The rating of the 2016-1 certificates issued by La Hipotecaria El
Salvadorian Mortgage Trust 2016-1 is directly linked to the credit
quality of DFC.
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.
=====================
P U E R T O R I C O
=====================
LIBERTY COMMUNICATIONS: Moody's Cuts CFR to 'B3', Outlook Stable
----------------------------------------------------------------
Moody's Ratings downgraded Liberty Communications PR Holding LP
("Liberty PR")'s ratings, including its corporate family rating and
probability of default rating to B3 from B2 and to B3-PD from
B2-PD, respectively. At the same time, Moody's also downgraded LCPR
Senior Secured Financing DAC backed senior secured and senior
secured notes to B3 from B2 and LCPR Loan Financing LLC backed
senior secured bank credit facility to B3 from B2. The ratings were
placed under review for downgrade. Previously, the outlook was
stable.
The action reflects the company's negative trend in operating
metrics including mobile ARPU and churn, and persistent net mobile
losses. The rating action also considers Liberty PR's weaker than
expected credit metrics with Moody's-adjusted EBITDA margin at
around 22.3% and leverage at 10.7x for the last twelve months ended
December 2024.
The review will focus on the path of reversal of the company's
negative operating trends, including its plan for ARPU revamp and
stopping the net mobile losses. The review will also focus on the
company's deleveraging path, the integration of the DISH Network's
acquisition and liquidity initiatives, including liability
management plan and other potential levers to navigate through the
challenging operating and competitive environment.
RATINGS RATIONALE
The rating action reflects higher than expected leverage (adjusted
debt/EBITDA, including Moody's adjustments) that will remain above
6x in the next 12-18 months. Moody's expected the company to
improve profitability during the second half of 2024 after the
company completed the migration of the mobile customer base to
Liberty PR's mobile core, executed in April. However, during the 3Q
2024 and 4Q 2024 the negative operating trend continued losing 23%
and 21% of the mobile base respectively, compared with the year
before. The negative trend has been further aggravated by the
withdrawal of government funding for schools in Puerto Rico and the
reduction in commercial activity because of customer migration
projects. Nonetheless, mobile ARPU declined during the 4Q 2024 on
promotional activity to retain customers.
Liberty PR's liquidity deteriorated in the last year due to weak
profitability, and Moody's now expects the company to generate
negative free cash flow, including the $145 million remaining
payments associated with the recent acquisition of DISH Network's
spectrum holdings in Puerto Rico and the US Virgin Islands. While
the company still has access to its $172.5 million senior secured
revolving credit facility maturing in 2027, the company can only
have one third of this facility drawdown, as of quarter end, before
the springing covenant kicks in. The next material debt maturity
will be in October 2027 in connection with the company's $1.2
billion in secured notes and Moody's expects the company to start
working on this maturity at least twelve months in advance.
While Liberty PR is one of the leading wireless and fixed telecom
operators in the Puerto Rican telecom market, competitive landscape
remains intense with other large companies operating in the market
including T-Mobile USA, Inc. (T-Mobile, Baa2 positive) and America
Movil, S.A.B. de C.V. (America Movil, Baa1 stable). Liberty PR is
the largest provider of fixed-line video services in Puerto Rico
with around 50% of the market share. T-Mobile has a leading
position, with around half of the market share in the mobile
market. Liberty PR benefits from a portfolio of wireless
subscribers who are mostly postpaid, accounting for 68% of the
current customer base as of December 2024, down from 88% the year
before. In paid TV and broadband, the two largest operators are
Liberty PR and America Movil.
Liberty PR B3 CFR factors the company's operating scale and
business model with leading wireless and fixed market positions in
Puerto Rico, its offering of a full suite of services, the quality
of its networks and mobile spectrum holdings. The B3 CFR also
reflects the group's concentration in two small markets, Puerto
Rico and the US Virgin Islands, which have relatively weak
economies and are exposed to adverse weather events, the company's
high leverage, weak liquidity and a highly competitive telecom
market in Puerto Rico.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The review for downgrade will focus on the path of reversal of the
company's negative operating trends, including its plan for ARPU
revamp and stopping the net mobile losses. The review will also
focus on the company's deleveraging path, the integration of the
Dish acquisition and liquidity initiatives, including liability
management plan and other potential levers to navigate through the
challenging operating and competitive environment.
The principal methodology used in these ratings was
Telecommunications Service Providers published in November 2023.
Liberty Communications PR Holding LP (Liberty PR) is a holding
company indirectly owned by Liberty Latin America Ltd. (LLA). In
October 2020, Liberty PR consolidated the combined operations of
Liberty Communications of Puerto Rico LLC (LCPR) and AT&T in Puerto
Rico and the US Virgin Islands. The combined operations offer a
full suite of wireless and fixed services, and have leading market
positions in wireless, fixed broadband and pay-TV in Puerto Rico,
as well as in fixed and wireless in the US Virgin Islands.
As of December 31, 2024, Liberty PR's fixed network passed
1,191,800 homes (accounting for over 95% of all households in
Puerto Rico) and had 1,061,600 fixed revenue-generating units
(RGUs). Liberty PR reported revenue for fiscal year 2024 of about
$1.26 billion and EBITDA margin of 22.3%.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
CARIBBEAN AIRLINES: TTALPA Wants Intervention in Salary Dispute
---------------------------------------------------------------
Otto Carrington at Trinidad and Tobago Guardian reports that the
T&T Airline Pilots' Association (TTALPA) wants Prime Minister Dr
Keith Rowley to urgently intervene in their ongoing salary dispute
with Caribbean Airlines Limited (CAL).
At a press conference held at the Normandie Hotel, St Ann's,
members of the union expressed frustration at the airline's failure
to pay the salary increases approved by Minister of Finance Colm
Imbert, according to Trinidad and Tobago Guardian.
Industrial relations consultant for TTALPA Timothy Bailey called
for Prime Minister Rowley to intervene, given the critical role
pilots play in connectivity and the economy, the report notes.
Noting that the Minister of Finance has already allocated the
necessary funds, Bailey said: "We are saying to the board and
management of Caribbean Airlines, while you want to party, our
pilots want their money, the report relays.
"Sign off on the collective agreement, pay the pilots what they are
owed, and focus on the airline's core mission," the report
discloses.
He said the CAL board's inaction necessitates higher-level
intervention to ensure the airline's obligations to its pilots are
met promptly, the report says.
"The company has failed to meet with the union, to counter-propose
and as a result, we were left with no choice but to refer the
matter to the Minister of Labour for conciliation," he said, the
report notes.
Bailey revealed that during conciliation proceedings earlier, CAL
representatives failed to present a counterproposal or fully engage
in discussions, the report discloses.
Officials of the union said Minister Imbert approved a four per
cent salary increase for pilots for the period 2015–2020,
followed by another four per cent increase for 2020–2023, the
report recalls. Although a collective agreement was signed on
December 11, the airline has not yet implemented the full payments
owed to pilots, he said, the report notes.
Bailey said only a portion of the salaries have been paid and the
company has failed to engage in meaningful negotiations to address
the outstanding amounts, the report says.
TTALPA also took issue with CAL's continued focus on entertainment
events, while its pilots remain unpaid, the report relates. Bailey
noted while CAL has been hosting marketing events and parties, it
has neglected its core duty as an airline and employer, the report
notes.
"This prolonged negotiation process, spanning nearly a decade, has
taken a toll on the pilot body," he said.
"Aviation is a highly regulated industry, second only to warfare in
terms of operational standards. Our pilots must remain fully
focused, without unnecessary distractions caused by financial
uncertainty," he added.
TTALPA assured that despite their grievances, the pilots will
continue to operate safely during the Carnival season, the report
relays. However, he stressed that urgent action is needed to
resolve the issue before it further impacts the airline's
operations and pilot morale, the report notes.
Bailey explained that as essential workers, pilots are limited in
their ability to engage in traditional industrial action, making
public awareness campaigns a vital tool in their advocacy, the
report discloses.
Contacted, CAL head of Corporate Communications, Dionne Ligoure,
said the negotiations between the airline and union are ongoing and
the company continues to operate in good faith, the report adds.
About Caribbean Airlines
Caribbean Airlines Limited -
http://www.caribbean-airlines.com/providespassenger airline
services in the Caribbean, South America, and North America. The
company also offers freighter services for perishables, fish and
seafood, live animals, human remains, and dangerous goods. In
addition, it operates a duty free store in Trinidad. Caribbean
Airlines Limited was founded in 2006 and is based in Piarco,
Trinidad and Tobago.
Caribbean Airlines is among many airlines whose business has been
greatly affected in 2020 by the slowdown of international travel
caused by the COVID-19 pandemic. The government of Trinidad &
Tobago guaranteed a US$65 million loan for the airline, and that
funding has helped with the airlines' cash flow shortfall since
May 2020. In September 2020, the airline related it will be
taking cost-cutting measures to help keep it afloat. The
measures, which was to affect some 1,700 employees, included
salary deductions, no-pay leaves and lay-offs.
*********
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