/raid1/www/Hosts/bankrupt/TCRLA_Public/250408.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, April 8, 2025, Vol. 26, No. 70
Headlines
A R G E N T I N A
ARGENTINA: World Bank Promises 'Significant Support' for Milei
B R A Z I L
BANCO DE BRASILIA: S&P Places 'B' ICR on CreditWatch Developing
PETROLEO BRASILEIRO: Fitch Affirms BB Long-Term IDR, Outlook Stable
RUMO SA: Fitch Affirms 'BB+' Long-Term IDR, Outlook Stable
STATE OF SERGIPE: Fitch Assigns 'BB' Long-Term IDR, Outlook Stable
C H I L E
LATAM AIRLINES: Fitch Hikes Long-Term IDR to 'BB', Outlook Positive
LATAM AIRLINES: Reaches Bankruptcy Deal to Hand Reins to Creditors
C O L O M B I A
GRUPO NUTRESA: Fitch Lowers Long-Term IDR to 'BB+', Outlook Stable
J A M A I C A
JAMAICA: Only Two Bids Submitted for $2.5BB in Repurchase Offer
JAMAICA: Remittance Flows to Jamaica up by 3.9% in Jan., BoJ Says
T R I N I D A D A N D T O B A G O
NATIONAL INVESTMENT: Records $800 Million Loss for 2024
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A R G E N T I N A
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ARGENTINA: World Bank Promises 'Significant Support' for Milei
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Buenos Aires Times reports that the head of the World Bank has
promised "significant" financial support to Argentina in the short
term after a meeting with President Javier Milei in Buenos Aires.
Indian-US businessman Ajay Banga was welcomed by Argentina's head
of state at the Casa Rosada, according to Buenos Aires Times.
According to a statement from the government, he assured Milei that
the World Bank is "working closely" to "support his ambitious
reform agenda," the report notes.
"As a short-term demonstration of that commitment, we are preparing
a significant support package that brings together the full
strength of the World Bank Group to support reforms, attract
private investment and lay the foundation for job creation," he
said in comments reported by Buenos Aires, the report relays.
The visit comes as Argentina negotiates US$20 billion in fresh
funding from the International Monetary Fund, on top of its
existing US$44-billion debt, the report relays.
Economy Minister Luis Caputo said Argentina -- in addition to the
IMF funds -- would seek additional financing from the World Bank,
the Inter-American Development Bank (IDB/BID) and the CAF regional
development bank, the report notes.
"Argentina is undertaking a bold set of economic reforms to
stabilise its economy and unlock private sector–led growth, the
report discloses. Ajay met with [President Javier] Milei to
reaffirm support for this transformation," said the World Bank in a
post on social media, the report relays.
The meeting in Buenos Aires was also attended by Caputo, Finance
Secretary Pablo Quirno and Presidential Chief-of-Staff Karina
Milei, the report discloses.
Banga said the institution he leads is "moving forward in close
coordination with the Argentine economic team, the International
Monetary Fund (IMF) and the Inter-American Development Bank (IDB)
to ensure that the support is aligned, effective and sends a strong
signal of international confidence in Argentina's future," the
report relays.
According to the government, Milei and Banga discussed Argentina's
reform plan and how the World Bank can support private-sector
growth and job creation, the report discloses. Milei then detailed
the measures implemented since he took office in December 2023,
which have helped him lower inflation.
According to a government readout, Banga highlighted the progress
made by Milei and congratulated Milei for the "bold transformation"
he is leading in Argentina, adds the report.
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.
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B R A Z I L
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BANCO DE BRASILIA: S&P Places 'B' ICR on CreditWatch Developing
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S&P Global Ratings placed its global scale 'B' long-term and
national scale 'brA+/brA-1' issuer credit ratings on BRB – Banco
de Brasilia S.A. on CreditWatch developing. S&P affirmed the global
scale 'B' short-term issuer credit rating.
BRB announced that it plans to acquire 49% of Banco Master's voting
capital. BRB also plans to acquire the totality of preferential
shares issued by Banco Master S.A. The transaction was announced on
March 28, 2025, but it is pending regulatory approvals and requires
the divestment of some of Banco Master's assets. As of December
2024, Banco Master's assets amounted to Brazilian real (R$) 63
billion, while its common equity was R$4.7 billion. In turn, BRB's
total assets were R$55.4 billion and its common shareholder equity
totaled R$2.9 billion as of September 2024 (the latest date
available for BRB's financials),
The acquisition could cause BRB's credit fundamentals to deviate
significantly from S&P's previous expectations. Potential changes
include the bank's capitalization, which should be consolidated
with those of the acquired entity after the transaction closes,
along with new risk exposures, integration challenges, impacts on
revenue stability and diversification (positive or negative), and
funding and liquidity shifts. Additionally, some aspects of the
transaction haven't been defined, such as which assets--along with
their value--will be spun off.
Initially, certain assets like Precatorios (payment orders issued
by the judiciary against a government) and equity funds are
excluded from the deal, along with Banco Master's ownership over
Banco Voiter, Letsbank, Banco Master de Investimento, and KOVR
Participacoes. However, the acquisition could include other assets
whose risk profile is still uncertain to us. These include Fundos
de Investimento em Direitos Creditorios (which are securitization
funds), which represented R$10 billion of Banco Master's assets,
along with Fundos de Investimento Multimercado (hedge funds),
amounting to R$8.1 billion.
Furthermore, the final capital structure of Banco Master is yet to
be defined, especially since its shareholder had announced new
capital injections earlier this year in addition to the
reorganization. Finally, S&P will need to analyze the acquired
entity's business and balance sheet to assess the impact on BRB's
creditworthiness.
Banco Master's strategy is characterized by rapid non-organic asset
growth and the issuance of high-yielding deposits through third
parties. The bank has evolved from a small institution with R$3.7
billion in assets and R$2.6 billion in deposits in December 2019 to
a midsize entity with R$63 billion in assets and approximately R$50
billion in deposits by the end of 2024. Growth has resulted from
several acquisitions of other financial institutions and the
funding of its business through above-market yield deposits issued
via third-party distributors, many of which are secured by deposit
insurance from the Fundo Garantidor de Crédito. Banco Master's
asset portfolio is complex and varied, including traditional loans
and unconventional high-yield assets.
S&P said, "Our ratings on BRB consider its solid market share in
the Distrito Federal, its robust growth in the recent past, and
stable funding base. We view BRB's stable and low-cost funding base
as a credit strength, along with its high share of payroll
deductible loans in its loan book, which are less sensitive to
economic swings.
"On the other hand, we see BRB's rapid asset growth and expansion
to new asset types and regions as risks to asset quality metrics
and operational performance. Moreover, due to the sharp increase of
assets, BRB's capital ratios have tightened since 2022."
To support such growth, private investors made two capital
injections in 2024. The latest one took place in December 2024,
totaling R$750 million (about one-fourth of BRB's common equity).
This injection is pending the regulatory approval.
BRB has struggled to improve its profitability, which declined in
recent years due to tighter margins. Margins had been falling due
to lower spreads in payroll deductible loans and BRB's changing
portfolio mix amid its expansion strategy. On the other hand, asset
quality metrics have remained manageable and in line with the
industry's average thanks to the high share of payroll deductible
loans and house financing on BRB's balance sheet. Overall, the
bank's net income in 2024, considering data up to September 2024,
was R$93.7 million, which corresponds to an annualized return on
average equity of 4.6%.
The CreditWatch developing listing reflects the uncertainty over
the transaction's impact on BRB's revenue stability, governance,
capital structure, exposures, and funding and liquidity profiles,
along with pending details and regulatory approvals.
To resolve the CreditWatch listing, S&P will consider:
-- To what extent the acquisition will expose BRB to the risks and
complexities related to Banco Master's current operations;
-- Synergies, efficiencies, and challenges to the integration of
operations and impact on revenue stability, diversification, and
profitability;
-- The final form of the consolidated capital structure and how
BRB will manage capitalization and growth afterward; and
-- Integration of the funding base and how this will affect BRB's
funding costs, liquidity, and refinancing risks.
S&P said, "We expect to resolve the CreditWatch listing as soon as
necessary approvals are met and when we conclude our assessment of
the acquisition impact's on BRB's creditworthiness. The ratings
would likely remain unchanged if the acquisition does not
materialize."
PETROLEO BRASILEIRO: Fitch Affirms BB Long-Term IDR, Outlook Stable
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Fitch Ratings has affirmed Petroleo Brasileiro S.A.'s Long-Term
Local and Foreign Currency Issuer Default Ratings (IDRs) and
outstanding debt ratings at 'BB'. The Rating Outlook is Stable.
Additionally, Fitch has affirmed Petrobras' Long-Term National
Scale rating at 'AAA(bra)'. The Rating Outlook for the National
Scale Rating is Stable.
Petrobras' ratings and Outlook are linked to Brazil's sovereign
ratings (BB/Stable) due to the company's strategic importance to
the country and the government's strong ownership and control.
Petrobras' dominant market share in the supply of liquid fuels in
Brazil, and large hydrocarbon production footprint in the country,
expose it to government intervention through pricing policies and
investment strategies.
Key Rating Drivers
Sovereign Linkage: Petrobras' ratings are linked to Brazil's
sovereign ratings because of the influence the government may have
over the company's strategies and investments. This is despite
material improvements in the company's capital structure and
efforts to isolate itself from government intervention. By law, the
federal government must hold at least a majority of Petrobras'
voting stock and currently owns 50.3% of Petrobras' voting rights,
directly and indirectly. The government has a 36.8% overall
economic stake.
Strong Operational Performance: Petrobras' 'bbb' Standalone Credit
Profile (SCP) reflects the company's operational scale and proved
reserves, both comparable with investment-grade international oil
companies. Fitch forecasts Petrobras' production will reach 3.0
mmboed by 2028 compared with 2.7 mmboed in 2024, and will maintain
its 1P reserve life of nearly 11 years. Petrobras' exploration
efforts have been successful, and the delivery of FPSOs Maria
Quiteira, Marechal Duque de Caixas and Almirante Tamandaré
positions the company to increase gross production by nearly
500,000 boed in 2025 and 2026.
Strong Cash Flow Generation: Fitch expects Petrobras to continue
reporting positive FCF over the rating horizon while investing
enough to replenish reserves, which will further support its SCP.
Petrobras is the lowest cost producer in the region. In 2024, Fitch
estimated its half-cycle cost was USD14.35/bbl and its full-cycle
cost of production was USD31.35/bbl. Its low cost of production led
to strong cash flow generation in 2024, when the company generated
USD41.8 billion in EBITDA and USD27.9 billion in FFO. The company's
cash flow comfortably covers its capex as stated in its current
strategic plan.
Robust Financial Metrics: The company's consistent cash flow
generation and controlled cost structure translate into strong
EBITDA generation and, thus, low leverage. Fitch expects debt to
EBITDA to remain below 1.0x, even as oil prices trend towards
mid-cycle level of USD60/boe, consistent with investment grade
categories. Healthy credit metrics also support strong access to
financial markets and financial flexibility of the company.
Peer Analysis
Petrobras' linkage to the sovereign is similar to peers like
Petroleos Mexicanos (PEMEX; B+/Stable), Ecopetrol S.A.
(BB+/Negative) and YPF S.A. (CCC). It also compares with Empresa
Nacional del Petroleo (ENAP; A-/Stable) and Petroleos del Peru -
Petroperu (CCC+). These companies have strong linkages to their
respective sovereigns given their strategic importance and the
potentially significant sociopolitical and financial implications a
default could have for their countries.
Petrobras' SCP is commensurate with a 'bbb' rating, which is
materially higher than PEMEX's 'ccc-', due to Petrobras' positive
deleverage trajectory compared to PEMEX's increasing leverage.
Petrobras has reported and is expected to continue reporting
positive FCF and production growth, which Fitch expects to reach
approximately 3.0 million boe/d in the next four years. In
contrast, PEMEX's production has declined in recent years and
requires material capex to sustain the production stabilization
trend reported since 2019.
These production trajectories further support the notching
differential between the two companies' SCPs. Petrobras' SCP is in
line with that of Ecopetrol at 'bbb-' given both companies' strong
credit metrics and deleveraging trajectories.
Key Assumptions
- Gross production to increase to approximately 3.0 million boe/d
over the next four years;
- Lifting cost average of $6.00bbl over the next four years;
- Brent crude trends toward USD60/bbl by 2028 per Fitch price
deck;
- Average FX rate trends toward BRL5.80/USD;
- Dividends payout of USD 55 billion in the next five years ;
- No further proceeds of asset sales considered over the rated
horizon.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A negative rating action on Petrobras could result from a
downgrade of the sovereign and/or the perception of a lower linkage
between Petrobras and the government coupled with a material
deterioration of Petrobras' SCP;
- An increase of gross leverage to 3.5x or above may result in a
downgrade of the SCP.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A positive rating action on the Brazilian sovereign could lead to
a positive rating action on Petrobras.
Liquidity and Debt Structure
Petrobras' liquidity is robust and provides added support during
periods of volatility in hydrocarbon prices. The company's
liquidity is supported by approximately USD7.5 billion of cash and
marketable securities as of Dec. 31, 2024, compared with current
financial debt maturities of approximately USD2.6 billion. The
company also had USD 8.1 billion of revolving facilities available
at the end of 2024. The majority of Petrobras' available liquidity
is comprised of readily available liquidity held abroad.
Petrobras continues to demonstrate a strong ability to access
domestic and international capital markets. Petrobras has a
manageable debt maturity profile, with 76% of its debt due after
2027.
Issuer Profile
Petrobras is a government-related entity and one of the world's
largest integrated oil and gas companies, operating primarily in
Brazil where it is the dominant participant and the largest liquid
fuels supplier.
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
Petroleo Brasileiro S.A. (Petrobras) has an ESG Relevance Score of
'4' for GHG Emissions & Air Quality due to the growing importance
of the continued development and execution of the company's
energy-transition strategy, which has a negative impact on the
credit profile, and is relevant to the rating[s] in conjunction
with other factors.
Petroleo Brasileiro S.A. (Petrobras) has an ESG Relevance Score of
'4' for Human Rights, Community Relations, Access & Affordability
due to the potential impact of social pressures on pricing policy
in the future, which has a negative impact on the credit profile,
and is relevant to the rating[s] in conjunction with other
factors.
Petroleo Brasileiro S.A. (Petrobras) has an ESG Relevance Score of
'4' for Governance Structure due to its nature as a majority
government-owned entity and the inherent governance risk that
arises with a dominant state shareholder, which has a negative
impact on the credit profile, and is relevant to the rating[s] 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
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Petroleo Brasileiro
S.A. (Petrobras) LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
Petrobras Global
Finance BV (PGF)
senior unsecured LT BB Affirmed BB
RUMO SA: Fitch Affirms 'BB+' Long-Term IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed Rumo S.A.'s (Rumo) Long-Term Foreign
Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs)
and its unsecured bonds, issued by Rumo Luxembourg S.a.r.l., at
'BB+'. Fitch has also affirmed Rumo and its subsidiaries' National
Scale Long-Term Ratings and unsecured debentures at 'AAA(bra)'. The
Rating Outlook for the corporate ratings is Stable.
Rumo's ratings reflect its strong position as a leading Brazilian
railroad operator, with solid and growing operating cash flow,
strong liquidity and moderate net leverage, despite expected
negative FCF. The concentration risk in agribusiness is offset by
railways' competitive advantages in Brazil's cargo transport.
Fitch rates Rumo based on its standalone credit profile (SCP) due
to the porous linkage with its weaker parent, Cosan S.A. (LC IDR:
BB/Stable), under its "Parent and Subsidiary Linkage Rating
Criteria." This consideration limits Rumo's LC IDR to two notches
above Cosan's, so currently it is not a constraint.
Key Rating Drivers
Solid Industry Fundamentals: Railroad sector risks are low due to
strong demand and limited competition. Rumo benefits from its
market position as the main rail transport company in the south and
midwest of Brazil, with ample network through five concessions to
operate more than 13,500km of tracks and access to three ports. The
company's low-cost structure gives it solid competitive advantages
over truck transport, which supports stable demand, mitigates
operating concentration in agribusiness, and limits volume
volatility over cycles.
Strengthening Business Profile: The Rumo Malha Central line project
and expansion of Rumo Malha Norte up to Lucas do Rio Verde are
credit positives, as these stretches drive opportunities for
capturing greater grain volumes. Rumo should transport 83 billion
revenue ton kilometers (RTK) in 2025, up from 80 billion RTK in
2024. The potential non-renewal of Rumo Malha Sul and Rumo Malha
Oeste in 2027 is expected to have a limited impact on credit
metrics. These businesses contribute approximately 10% of
consolidated EBITDA and have lower operating margins (around 35%)
compared to the consolidated margins of 45% to 50%.
Moderate Volume Growth: Volumes should increase by an average 4.0%
annually in 2025 and 2026, driven by the positive Brazilian
agricultural business, offset by GDP-related growth for industrial
products. Brazilian GDP is expected to grow 1.9% in 2025 and 2026.
Rumo's primary cargo is agricultural products that are
predominately exported, mainly soybean and soymeal (43% in 2024),
corn (26%), fertilizers (7%) and sugar (7%).
Robust Profitability: Rumo's robust EBITDA margin is likely to
remain in the 46%-49% range over the coming two years, as the group
gains scale. EBITDA margin may trend to above 50% from 2027 on, in
case the group releases the Southern and Western operations which
are less profitable than the consolidated business. Fitch's rating
case forecasts EBITDA and cash flow from operations (CFFO) of
BRL6.7 billion and BRL4.7 billion, respectively, in 2025 and BRL7.5
billion and BRL5.2 billion, respectively, in 2026, under Fitch's
criteria definitions.
FCF Remains Under Pressure: Obligations related to Rumo Malha
Paulista's concession renewal and the significant capex
requirements for the extension of Rumo Malha Norte will likely
pressure FCF. Fitch projects high capex of around BRL18.5 billion
in 2025-2027 to result in negative FCF of roughly BRL4.6 billion in
the period. Fitch expects Rumo Malha Norte's expansion to begin
operations in 2027.
Moderate Leverage: Rumo should have moderate leverage ratios, even
during the high investment period. Fitch's base case scenario
forecasts improvements in Rumo's operating cash flow generation,
with gains of scale from investments, resulting in net debt/EBITDA
limited at 2.5x in 2025-2028. Gross leverage should decline toward
3.0x over the medium term, compared with average 5.1x from 2021 to
2023.
Credit Linkage Incorporated: Rumo's ratings reflect its SCP,
despite links with the parent. Fitch considers Rumo's legal
ring-fencing to limit Cosan's access to its cash porous, as debt
instruments limit dividend distributions and leverage metrics.
Fitch assessed Cosan's control of Rumo as porous and Rumo's funding
and cash management as insulated. This allows Rumo's rating to be
up to two notches higher than Cosan's 'BB'. Rumo and its
subsidiaries' ratings are equalized mainly due to strong legal ties
among them relative to guarantees and cross-default clauses on
their debt. Medium or high strategic and operational incentives for
Rumo to support its subsidiaries also reinforce the ratings
equalization.
Peer Analysis
Rumo's Local Currency IDR is below those of other class one
railroad companies in North America, which are generally rated in
the high 'BBB' to low 'A' categories. Rumo's 'BB+' rating
negatively compares with Mexico-based Grupo Ferroviario Mexicano,
S.A. de C.V's 'BBB+' and U.S..-based Union Pacific Corporation's
(UPC) 'A-'. Although the three railroads operate with similar
business profiles and competitive positions in their respective
markets, Grupo Ferroviario Mexicano and Union Pacific are more
mature, more geographically diversified — operating in Mexican,
U.S. and Canadian markets — and less leveraged.
Rumo's Local Currency IDR is lower than that of Brazilian peer MRS
Logistica S.A. (MRS; Local Currency IDR BBB-/Stable). MRS is the
best-positioned railroad in Brazil due to its more resilient cargo
profile, track record of positive FCF, captive customer base who
also are shareholders, and lower net leverage.
Rumo's Local Currency IDR is above that of Hidrovias do Brasil S.A.
(BB-/Rating Watch Negative) due to Rumo's ability to generate more
stable operating cash flow and finance its large investments to
increase volumes. Fitch expects Hidrovias do Brasil's net leverage
to remain higher than Rumo's over the next two to three years.
Key Assumptions
- Release of Malha Sul and Malha Oeste concessions when they expire
(2027);
- Agricultural volumes in the North, Paulista, Central and South
networks increase by an average of 5.0% in 2025 and 2026;
- Industrial volumes to increase by GDP (1.9%) in 2025 and 2026;
- Average tariffs to increase by 5.1% in 2025 and 4.3% in 2026;
- Total capex of BRL22.3 billion in 2025-2028, with BRL6.2 billion
in 2025;
- Dividends corresponding to 25% of net income from 2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- An inability to finance capex with long-term and low-cost debt,
pressuring Rumo's debt amortization schedule;
- Substantial weakening of its EBITDA margins;
- Net adjusted leverage trends above 3.5x on a sustained basis;
- If Cosan's LC IDR is downgraded to 'B+' or below, Rumo's LC IDR
would be downgraded to Cosan's rating plus two notches, if Cosan's
access to Rumo's cash remains unchanged.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to Rumo's LC IDR depend on positive FCF trends and
maintenance of net leverage below 3.0x;
- A higher Country Ceiling for Brazil coupled with an upgrade of
the LC IDR would lead to a positive action on the FC IDR;
- Positive actions on the National Scale Long-Term Rating are not
possible, as the rating is at the top of the national scale.
Liquidity and Debt Structure
Fitch expects Rumo's liquidity to remain healthy during the higher
investment cycle. The cash to short-term debt ratio has been strong
and above 3.0x since 2019. Rumo's ability to raise long-term funds
to finance negative FCF and preserve its liquidity is a positive
credit consideration. On Dec. 31, 2024, Rumo had cash and
equivalents of BRL8.6 billion, which favorably compare with BRL3.4
billion debt maturing by 2026. Consolidated total debt was BRL19.2
billion, mainly consisting of debentures of BRL10.1 billion, senior
notes of BRL4.2 billion (net of derivatives) and debt with Banco
Nacional de Desenvolvimento Economico e Social of BRL2.3 billion.
Issuer Profile
Rumo, Latin America's largest independent rail-based logistics
operator, provides railroad transportation, port terminal, and
warehousing services. Its service area extends over Mato Grosso,
Sao Paulo and other southern states in Brazil. The company is the
logistics arm of Cosan Group.
Summary of Financial Adjustments
- Confirming (reverse factoring) operations adjusted on Rumo's
debt;
- Restricted cash (including long term) treated as readily
available liquidity;
- Net derivatives adjusted to debt;
- Dividends from associates and minorities adjusting EBITDA;
- Lease and concession expenses treated as operating expenses,
affecting EBITDA.
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 Prior
----------- ------ -----
Rumo Luxembourg
S.a.r.l
senior unsecured LT BB+ Affirmed BB+
Rumo Malha
Paulista S.A. Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
Rumo Malha Norte S.A. Natl LT AAA(bra) Affirmed AAA(bra)
Rumo Malha Sul S.A. Natl LT AAA(bra) Affirmed AAA(bra)
Rumo S.A. LT IDR BB+ Affirmed BB+
LC LT IDR BB+ Affirmed BB+
Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
STATE OF SERGIPE: Fitch Assigns 'BB' Long-Term IDR, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has assigned the State of Sergipe Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) of 'BB'. The
Rating Outlook is Stable. In addition, Fitch has assigned Sergipe
Short-Term Foreign and Local Currency IDRs of 'B', a National
Long-Term Rating of 'AAA(bra)'/Stable Outlook, and a National
Short-Term Rating of 'F1+(bra)'. Sergipe Standalone Credit Profile
(SCP) is assessed at 'bb'.
Sergipe's operating expenditures have grown below operating
revenues in recent years. The state has adopted a fiscal rule that
pursues a current savings target of at least 5% of current
revenues, which contributes to expenditure sustainability under
Fitch's scenario horizon. Sergipe also negotiated a debt
restructuring operation with the World Bank for USD 110 million.
Resources were disbursed in early 2025 and will lead to lower debt
service during 2025-2030.
Key Rating Drivers
Risk Profile: Weaker
The assessment reflects Fitch's view that there is a high risk of
the issuer's ability to cover debt service with the operating
balance weakening unexpectedly over the scenario horizon
(2025-2029). This could occur due to decreased revenue, increased
expenditure or an unexpected rise in liabilities or debt-service
requirements.
Revenues Robustness: Weaker
Fitch evaluates this factor as 'Weaker' due to the state's
dependence on transfers from a 'BB' rated counterpart (the
sovereign).
The Brazilian tax collection framework transfers to states and
municipalities a large share of the responsibility to collect
taxes. Constitutional transfers exist as a mechanism to compensate
poorer entities. For that reason, Fitch views a high dependency
towards transfers as a weak feature for Brazilian local and
regional governments (LRGs).
The primary metric for Revenue Robustness is the transfers ratio
(transfers to operating revenues). Fitch classifies LRGs with a
transfer ratio above or equal to 40% as 'Weaker' and those with a
ratio below 40% as 'Midrange'. Sergipe is highly dependent on
transfers, which accounted for 52% of its average operating
revenues during 2020-2024.
Historically, Sergipe's revenue growth has performed above its GDP
growth. From 2019-2024, CAGR was 4.9% in real terms for operating
revenues, compared to average annual GDP growth of 1.9%.
Revenue Adjustability: Weaker
Fitch evaluates this factor as 'Weaker' due to Brazilian states'
reliance on a small number of taxpayers and the history of federal
intervention in state tax policy.
Fitch believes Brazilian states and municipalities have low
capacity to increase revenue during a downturn. Tax tariffs are
close to the constitutional national ceiling, and a small number of
taxpayers contribute a large share of tax collection, making
additional taxation unaffordable. Brazil also has a history of
federal intervention in subnational taxation. In July 2022, the
National Congress set a ceiling on the Imposto sobre Circulação
de Mercadorias e Serviços (ICMS) tariff on fuels and electricity.
This caused revenue losses for states and municipalities, which
were only partially reversed later. Sergipe raised its average
basic ICMS tariff to 19% from 18% in April 2023 to help compensate
for revenue losses.
The most significant tax, the ICMS, has a concentrated taxpayer
base. The state reports that its 10 largest taxpayers corresponded
to 33.33% of total ICMS tax collection in 2024.
Expenditure Sustainability: Midrange
Fitch evaluates this factor as 'Midrange' due to adequate operating
margins during the last few years.
Responsibilities for states are moderately countercyclical because
they handle healthcare, education and law enforcement. Expenditures
grow with revenues due to earmarked revenues. States and
municipalities must allocate a share of revenues to health and
education, causing procyclical behavior in good times; high revenue
growth leads to increased spending. However, the significant weight
of personal expenditures and salary rigidity means downturns do not
cause similar drops in expenditures despite lower revenues.
Sergipe reports moderate control over expenditure growth, with
sound margins. Operating margins averaged 9.9% from 2020-2024 and
8.2% by the end of 2024 (excluding extraordinary revenues from the
concession of the state's sanitation system). The state is current
on its payroll bill and has no significant delays for the payment
of suppliers. Operating expenditure CAGR was 3.8% in real terms
between 2019-2024, below operating revenues CAGR of 4.9%.
Sergipe enacted a new fiscal framework through Law No. 9.324 on
Dec. 29, 2023. The framework will contribute to sustain fiscal
sustainability by pursuing a minimum current savings of 5% of
current revenues. The goal is to sustain the state's assessment
under the National Treasury CAPAG (Capacidade de Pagamento) system
at a minimum of 'B'. States with a CAPAG of 'A' or 'B' qualify for
new loans with federal guarantee.
Expenditure Adjustability: Weaker
Brazilian local governments have a fairly rigid cost structure,
driving this factor to 'Weaker'. As per the Brazilian Constitution,
there is low affordability of expenditure reduction, especially for
the payroll bill and pensions. As a result, whenever there is an
unpredictable reduction in revenues, operating expenditure do not
automatically decrease in parallel.
Sergipe's personal expenditures were 56.7% of total expenditures in
2024. This item has very limited flexibility for adjustments given
salary rigidity and limited ability to manage human resources or
pensions. Other operating expenditures were close to 38.6% of total
expenditures in 2024 and have some flexibility for adjustments but
are still limited by constitutional mandates on health and
education. Capex was 6% of total expenditures in 2024 and averaged
5.9% between 2020 and 2024. Brazilian LRGs often rely on investment
cuts in challenging economic scenarios.
Liabilities and Liquidity Robustness: Weaker
Access to new loans is restricted because Brazilian LRGs are not
allowed to access the market through bond issuances and private
banks rarely engage with subnationals. Lenders consist mainly of
public commercial and development banks and multilateral
organizations. Loans are often guaranteed by the federal
government, especially for foreign currency loans. For that reason,
the federal government has strict control over new lending to
LRGs.
There is a moderate national framework for debt and liquidity
management since there are prudent borrowing limits and
restrictions on loan types. Under the Fiscal Responsibility Law of
2000, Brazilian LRGs must comply with indebtedness limits.
Consolidated net debt for states cannot exceed 2x, or 200%, of net
current revenue. Sergipe's debt ratio was 11.56% as of YE 2024. The
law also sets limits for guarantees at 22% of net current revenues.
Sergipe had no guarantees as of YE 2024.
As of December 2024, external debt was BRL1,164million, or 31% of
direct debt. External debt is largely owed to multilateral
organizations and has a federal government guarantee. Fitch expects
the share of external debt to increase as the state has recently
signed a USD110 million loan with the World Bank to restructure
other direct liabilities with Banco do Brasil S.A. (BB/Stable),
Banco de Brasilia S.A. BRB (B-/Negative) and Caixa Econômica
Federal (BB/Stable). While the exposure to foreign currency risk
should increase, Fitch expects the debt maturity profile to
lengthen, while interest costs will decrease.
Debt directly owed to the federal government was 31.6% of Sergipe's
direct debt in December 2024. Intergovernmental debt has more
favorable terms, such as debt service relief during periods of
economic distress, as seen in 2020 and early 2021.
There is moderate off-balance-sheet risk stemming from the pension
system, which is a burden for most Brazilian LRGs, especially for
states with a mandate over education and public security. Another
contingent liability is the payment of judicial claims or
"precatorios". The National Congress determined subnational
governments must fully amortize such liabilities until 2029.
Liabilities and Liquidity Flexibility: Midrange
A framework exists for the federal government to provide emergency
liquidity support by extending the maturity date for the state's
federal debt. Fitch assesses the entity's available liquidity,
excluding sovereign support, to decide between 'Weaker' and
'Midrange' assessments for liabilities and liquidity flexibility.
Fitch's liquidity rate for Brazilian LRGs is defined as the ratio
of short-term financial obligations to net cash, as established by
the previous version of the CAPAG system by the Brazilian National
Treasury. The CAPAG, or Capacidade de Pagamento, assesses which
entities qualify for federal government guarantees.
Fitch has set a threshold of 100% for the average of the last three
years (2022-2024 year-end) and for the last year-end results
available (December 2024), which would result in a 'Midrange'
assessment for this factor. Sergipe reported a three-year average
liquidity ratio of 31.1%. As of December 2024, the metric reached
22.2%, supporting the 'Midrange' assessment.
Financial Profile: 'aa' category
Sergipe's Financial Profile is assessed at 'aa'. Fitch's rating
case forward-looking scenario indicates that the payback ratio (net
adjusted debt to operating balance), the primary metric for the
financial profile assessment, will reach an average of 4.5x for the
2027-2029 period, which is aligned with a 'aaa' assessment. The
actual debt service coverage ratio (ADSCR), the secondary metric,
is projected at an average of 1.8x for 2027-2029, aligned with an
'a' assessment. Fitch applies an override to the overall financial
profile considering that the secondary metric is two categories
below the primary metric. Fiscal debt burden is projected at 22%
for the same period.
Derivation Summary
Fitch assesses Sergipe's SCP at 'bb', reflecting a combination of a
'Weaker' risk profile and financial profile in the 'aa' category
under Fitch's rating case. The SCP also reflects the peer
comparison.
If Fitch lowers Sergipe's SCP by one-notch, its IDRs would likely
remain at the same level because intergovernmental finance support
would apply. Debt owed to the federal government represents 31.6%
of the state's direct debt and provides some headroom to its IDRs.
Per Fitch's criteria, the uplift from intergovernmental finance
support cannot lead to an IDR above the lending government rating
(the sovereign).
Key Assumptions
Risk Profile: Weaker
Revenue Robustness: Weaker
Revenue Adjustability: Weaker
Expenditure Sustainability: Midrange
Expenditure Adjustability: Weaker
Liabilities and Liquidity Robustness: Weaker
Liabilities and Liquidity Flexibility: Midrange
Financial Profile: 'aa'
Fitch's rating action is driven by the following assumptions for
reference metrics under its 2025-2029 rating case scenario. These
include their respective changes since the last review and weights
in the rating decision:
- Payback ratio: 4.5x
- Actual coverage ratio: 1.8x
- Fiscal debt burden: 22%
Fitch's through-the-cycle rating case incorporates a combination of
revenue, cost and financial risk stresses. It is based on 2020-2024
published figures and its expectations for 2025-2029.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A negative rating action on Brazil's IDR would lead to a
corresponding rating action on Sergipe because, per Fitch's
criteria, Brazilian LRGs do not qualify to be rated above the
sovereign.
- Sergipe's IDRs would be downgraded if its enhanced payback ratio
is projected above 5x and its actual debt service coverage ratio is
projected below 2x.
- Sergipe's IDRs would be downgraded if its enhanced debt service
coverage ratio deteriorates to below 1.5x on a consistent basis.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A positive rating action on Brazil's IDR could lead to a
corresponding rating action on Sergipe because the state would
qualify for intergovernmental finance support as 31.6% of its debt
consists of intergovernmental debt.
Liquidity and Debt Structure
Sergipe's net adjusted debt includes BRL3.7 billion of direct debt
and unrestricted cash of BRL2.7 billion as of YE 2024. Fitch
estimates that close to 31% of debt is external debt with a federal
guarantee. Debt owed to the federal government is 31.6% of the
state's total debt.
Issuer Profile
Fitch classifies Sergipe as a Type B LRG, which are required to
cover debt service from cash flow on an annual basis. Sergipe's
population is 2.3 million, or approximately 1.1% of the Brazilian
population, with below average socioeconomic indicators. Its
revenue sources are primarily transfers from the federal government
and taxes. The main spending responsibilities cover education,
healthcare and law enforcement. According to budgetary regulation,
Sergipe may borrow on the domestic and international markets,
subject to federal government approval.
Date of Relevant Committee
27 March 2025
ESG Considerations
State of Sergipe has an ESG Relevance Score of '4' for Population
Demographics due to the negative weight the state's poverty rate
has on its revenue raising ability, which has a negative impact on
the credit profile, and is relevant to the rating 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
----------- ------
Sergipe, State of LT IDR BB New Rating
ST IDR B New Rating
LC LT IDR BB New Rating
LC ST IDR B New Rating
Natl LT AAA(bra) New Rating
Natl ST F1+(bra) New Rating
=========
C H I L E
=========
LATAM AIRLINES: Fitch Hikes Long-Term IDR to 'BB', Outlook Positive
-------------------------------------------------------------------
Fitch Ratings has upgraded LATAM Airlines Group S.A.'s (LATAM)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
to 'BB' from 'BB-', its Long-Term National Scale Rating to 'A(cl)'
from 'BBB+(cl)' and its unsecured and subordinated local issuances
to 'A-(cl)' from 'BBB(cl)'. Fitch has also upgraded LATAM's Equity
Rating to 'Primera Class Nivel 2(cl)' from 'Primera Class Nivel
3(cl)'. The Rating Outlook remains Positive.
The upgrade reflects LATAM's improving credit metrics driven by
growing profitability, operating cash flow generation and debt
repayment as well as enhancements in financial flexibility. LATAM's
FY25 credit metrics (total and net leverage of 2.2x and 1.5x,
respectively) are strong for its rating, tempered by high industry
cyclicality and its post-restructuring profile. LATAM has benefited
from mild fuel prices and strong recovery of passenger traffic and
yields of late. The company's ability to navigate different
economic cycles and maintain its current solid credit profile
should benefit the ratings, which supports the Positive Outlook.
Key Rating Drivers
Robust Operating Cash Flow: Fitch expects LATAM's operating cash
flow to continue to improve during 2025 underpinned by solid
traffic level, cost efficiencies, including fleet cost, and
capacity expansion. Fitch forecasts LATAM's adjusted EBITDAR to
reach around USD3.5 billion in 2025 and USD3.6 billion in 2026. The
most efficient cost base led to higher EBITDAR margins of 23.8%
during 2024 and important expansion from 21% in 2019. For
2025-2027, Fitch expects adjusted EBITDAR margins to range from
23%-24% in a scenario of less favorable fuel prices, lower demand
growth and a more competitive environment that weakens yields.
Positive FCF Generation: LATAM's commitment to manage cautiously
its growth opportunities in order to not deteriorate its credit
metrics remains key. Upcoming capital expenditures related to fleet
modernization and modest growth and modest dividends are well
covered by LATAM's operating cash flow generation. Fitch forecasts
LATAM's free cash flow generation to be positive during 2025 and
2026 around USD410 million after increasing capex. Fitch considered
capex of USD1.65 billion in 2025 and in 2026 and dividends of
USD225 million on average. Fitch considers that LATAM has some
flexibility to defer those elevated capex levels in a scenario of
downturn of the industry.
Deleveraging Trend: LATAM's leverage is expected to continue to
decline in 2025, despite higher capex and dividends. Fitch's base
case scenario forecasts the company's respective total and net
adjusted leverage/EBITDAR ratios at around 2.2x and 1.5x during
2025 and 2.2x and 1.4x for 2026, a continued improvement from the
respective 2023 levels of 2.7x and 2.1x and 2.3x and 1.7x in 2024.
Those metrics are considered strong for the rating category. As of
Dec. 31, 2024 LATAM's total debt was USD7.1 billion and it is
expected to rise to USD7.5 bn in 2025, but still much lower than
USD10.4 billion of debt as of 2019. During the Chapter 11, LATAM
was able to reduce around 35% of its debt.
Improving Financial Flexibility: LATAM has a record of maintaining
strong cash balances, a key rating consideration. The company's
financial flexibility is enhanced by revolving credit facilities of
USD1.575 billion that are fully undrawn, as well as a pool of
unencumbered asset base of USD1.5 billion, including aircraft and
additional engines. Fitch expects LATAM to maintain solid cash
balances, with cash plus RCF to LTM revenues on average above 25%,
as it seeks to reduce exposure to short-term refinancing risks and
industry volatility. Fitch expects LATAM to remain proactive on its
liability management strategy, as it seeks to reduce financial
costs or improve its secured/unsecured debt profile basis.
Market Position and Diversification: Fitch views LATAM's strong
business position as sustainable in the medium term, based on its
diversification within Latin America and the international routes
between Latin America and either North America, Europe, Africa or
Oceania. The analysis also incorporates the company's strong market
position in Brazil's domestic market and its position as the leader
among Brazilian companies in international markets, strong market
share in other key markets, and its joint venture with Delta Air
Lines, Inc. (BBB-/Stable). LATAM's cargo business is also solid and
has demonstrated important business resilience in recent years.
Above-Average Industry Risks: The airline industry is inherently a
high-risk sector given that it is a cyclical, capital-intensive
business with various structural challenges and prone to exogenous
shocks. High fixed costs combined with swings in demand and fuel
prices typically translate into volatile profitability and cash
flows. The exposure to foreign exchange fluctuations for the Latin
American players constitutes an additional risk, as most of its
costs are dollar denominated and large part of their operating cash
flow is generally in local currency. The history of several debt
restructurings within the airline sector in the region over the
past years highlights the risks.
Equity Rating: Fitch rates LATAM's shares at 'Primera Clase Nivel
2(cl)' based on its solvency and free float of 55%, according to
its ownership structure. In terms of liquidity, it has 100% market
presence and an average daily volume traded in the last month of
USD17 million, based on information as of March 2025.
Peer Analysis
LATAM's 'BB' ratings reflect its diversified business model, in
terms of product and geographic footprint, significant regional
market position, strong capital structure, robust liquidity and
financial flexibility. These positive factors are tempered by the
industry's high business risks and exposure to exogenous shocks.
LATAM is rated lower than global player Delta Air Lines
(BBB-/Stable) primarily due to the company's lower business scale,
diversification and financial flexibility. LATAM is rated at same
level of United Airlines Holdings, Inc. (BB/Positive) and two
notches above American Airlines Group, Inc. (B+/Stable) due to
better capital structure. In terms of the Latin American players,
LATAM's rating is above Avianca Group International Limited
(B/Stable) and AZUL S.A. (CCC/Positive) due to greater business
diversification, stronger capital structure and liquidity.
Key Assumptions
- Fitch's base case during 2025 and 2026 includes an increase in
ASK by 8% and 5%, respectively;
- Load factors around 82%-83% during 2025-2026;
- Jet fuel at USD2.65 in 2025 and USD2.75 in 2026;
- Capex of USD1.65 billion in 2025 and 2026.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Liquidity deterioration or difficulties continuing to access
credit lines;
- Gross and net leverage ratios consistently above 3.0x and 2.5x,
respectively;
- EBITDAR fixed-charge coverage sustained at or below 2.0x;
- Competitive pressures leading to a severe loss in market share or
yield deterioration;
- Aggressive growth strategy or M&A seeking industry consolidation
financed with debt;
- Shareholder-friendly dividend distribution.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Gross and net leverage below 2.0x and 1.5x, respectively, on a
sustainable basis;
- Sustainable positive FCF generation across different economic
cycles;
- Ability to maintain strong cost structure, with adjusted EBITDAR
margins above 26% on a sustainable basis;
- Continued ability to refinance its high-cost debt at more
attractive terms and improvements on a secured and unsecured mix;
- Maintenance of strong liquidity position (cash above 20% LTM
revenues, besides RCF) and well-spread debt amortization profile
with no major refinancing risks in the medium term;
- EBITDAR fixed-charge coverage sustained above 3.5x.
Liquidity and Debt Structure
LATAM's robust liquidity position is a key rating factor and Fitch
expects the company to remain proactive on its liability management
strategy in order to continue to reduce financial costs, improve
its debt profile mix and, ultimately, avoid refinancing risks.
LATAM held cash close to USD2.0 billion as of Dec. 31, 2024,
compared with short-term debt of USD635 million, including USD363
million of lease obligations. LATAM has two senior secured
revolving credit facilities (RCFs), fully undrawn, of USD1.575
billion. Including the RCF, the company's level of liquidity,
measured as total cash and marketable securities plus unused
committed credit lines over LTM revenue, was 27.1% as of Dec. 31,
2024.
The majority of LATAM's USD 7.2 billion of debt is fleet related,
with lease liability representing 47% of the total amount.
Non-fleet debt is USD2.375 billion, with no amortizations in the
next three years. Nevertheless, its 2029 bonds (USD700 million) are
callable in October 2025. In 2028, LATAM will have non-fleet debt
amortization of USD275 million, USD700 million in 2029 and 1.4
billion in 2030.
Issuer Profile
LATAM is the largest airline group in Latin America, with expansive
passenger and cargo operations and the largest loyalty program. At
December 2024, the company`s fleet of 347 aircraft mix was
concentrated in Airbus (77%) and Boeing (23%).
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 Prior
----------- ------ -----
LATAM Airlines
Group S.A. LT IDR BB Upgrade BB-
LC LT IDR BB Upgrade BB-
Natl LT A(cl) Upgrade BBB+(cl)
Nat Equity Rating Primera
Clase
Nivel 2 Upgrade Primera
Clase
Nivel 3
senior
unsecured Natl LT A-(cl) Upgrade BBB(cl)
subordinated Natl LT A-(cl) Upgrade BBB(cl)
LATAM AIRLINES: Reaches Bankruptcy Deal to Hand Reins to Creditors
------------------------------------------------------------------
LATAM Airlines Group S.A. (SSE: LTM) and its affiliates in Brazil,
Chile, Colombia, Ecuador, Peru, and the United States on Nov. 26,
2021, announced the filing of a Plan of Reorganization, which
reflects the path forward for the group to exit Chapter 11 in
compliance with both U.S. and Chilean law.
The Plan is accompanied by a Restructuring Support Agreement (the
"RSA") with the Parent Ad Hoc Group, which is the largest unsecured
creditor group in these Chapter 11 cases, and certain of LATAM's
shareholders. The RSA documents the agreement between LATAM, the
aforementioned holders of more than 70% of parent unsecured claims
and holders of approximately 48% of 2024 and 2026 U.S. Notes, and
certain shareholders holding more than 50% of common equity,
subject to the execution of definitive documentation by the parties
and the obtaining of corporate approvals by those shareholders. As
they have throughout the process, all of the companies in the group
are continuing to operate as travel conditions and demand permit.
"The last two years have been characterized by hardship across the
globe," we have lost friends and family, colleagues and loved
ones. And we have reeled as global aviation and travel were brought
to a virtual standstill by the largest crisis to ever face our
industry. While our process is not yet over, we have reached a
critical milestone in the path to a stronger financial future,"
said Roberto Alvo, Chief Executive Officer of LATAM Airlines Group
S.A. "We are grateful to the parties who have come to the table
through a robust mediation process to reach this outcome, which
provides meaningful consideration to all stakeholders and a
structure that adheres to both U.S. and Chilean law. Their infusion
of significant new capital into our business is a testament to
their support and belief in our long-term prospects. We are
thankful for the exceptional team at LATAM that has weathered the
uncertainty of the past two years and enabled our business to keep
operating and serving our customers as seamlessly as possible."
Plan Overview
The Plan proposes the infusion of $8.19 billion into the group
through a mix of new equity, convertible notes, and debt, which
will enable the group to exit Chapter 11 with appropriate
capitalization to effectuate its business plan. Upon emergence,
LATAM is expected to have total debt of approximately $7.26 billion
and liquidity of approximately $2.67 billion. The group has
determined that this is a conservative debt load and appropriate
liquidity in a period of continued uncertainty for global aviation
and will better position the group going forward.
Specifically, the Plan outlines that:
* Upon confirmation of the Plan, the group intends to launch an
$800 million common equity rights offering, open to all
shareholders of LATAM in accordance with their preemptive rights
under applicable Chilean law, and fully backstopped by the parties
participating in the RSA, subject to the execution of definitive
documentation and, with respect to the backstopping shareholders,
receipt of corporate approvals;
* Three distinct classes of convertible notes will be issued by
LATAM, all of which will be preemptively offered to shareholders of
LATAM. To the extent not subscribed by LATAM's shareholders during
the respective preemptive rights period:
-- Convertible Notes Class A will be provided to certain
general unsecured creditors of LATAM parent in settlement
(dación
en pago) of their allowed claims under the Plan;
-- Convertible Notes Class B will be subscribed and purchased
by the above referenced shareholders; and
-- Convertible Notes Class C will be provided to certain
general unsecured creditors in exchange for a combination of new
money to LATAM and the settlement of their claims, subject to
certain limitations and holdbacks by backstopping parties.
The convertible notes belonging to the Convertible Classes B
and C will therefore be provided, totally or partially, in
consideration of a new money contribution for the aggregate amount
of approximately $4.64 billion fully backstopped by the parties to
the RSA, subject to receipt by the backstopping shareholders of
corporate approvals;
* LATAM will raise a $500 million new revolving credit facility
and approximately $2.25 billion in total new money debt financing,
consisting of either a new term loan or new bonds; and
* The group also used and intends to use the Chapter 11 process
to refinance or amend the group's prepetition leases, revolving
credit facility, and spare engine facility.
The hearing to approve the adequacy of the Chapter 11 Disclosure
Statement and approve voting procedures is expected to be held in
January 2022, with specific timing dependent on the Court's
calendar. If the Disclosure Statement is approved, the group will
commence solicitation during which it will seek approval of the
Plan from creditors. LATAM is requesting the hearing to confirm the
Plan be held in March 2022.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
===============
C O L O M B I A
===============
GRUPO NUTRESA: Fitch Lowers Long-Term IDR to 'BB+', Outlook Stable
------------------------------------------------------------------
Fitch Ratings has downgraded Grupo Nutresa S.A.'s Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) to 'BB+' from
'BBB'. The Rating Outlook is Stable.
The downgrade follows the announcement of Jaime Gilinski's
(majority shareholder) acquisition of Nugil S.A.S., which holds
34.81% of Nutresa's shares. After the transaction, Mr. Gilinski
will now own 84.5% of Nutresa. The transaction was financed with a
USD2 billion bridge loan disbursed by Nutresa. Fitch believes this
transaction strains the company's capital structure and negatively
impacts corporate governance.
Nutresa's ratings reflect the weakened financial profile post
transaction. The ratings incorporate the company's strong business
profile, supported by a solid brand portfolio and extensive
distribution network, which bolster its competitive position. The
company is implementing efficiency and optimization initiatives to
significantly enhance profitability.
Key Rating Drivers
Potential Pressure on Capital Structure: The USD 2 billion debt
increase to fund the majority shareholder's stake acquisition
pressures the company's credit metrics. Gross leverage, defined as
adjusted debt to EBITDAR, is projected to rise to 4.8x, with net
leverage reaching 4.5x by 2025, up from 2.3x and 1.8x at YE 2024
respectively, considering share repurchases and the Alcora
transaction. Fitch believes Nutresa might gradually reduce gross
leverage to around 3.0x by 2028, depending on the results from
efficiency plans and potential investments.
Sound Operating Metrics: Nutresa's EBITDAR margins are slightly
above peer medians. Additionally, the company is working on several
initiatives to improve profitability, mostly focused on logistics,
commercial execution, plant efficiencies, segments restructuration
and price adjustments. Fitch projects profitability margins could
rise by 2 percentage points and EBITDAR might reach COP 3.1
trillion by YE 2025.
Strong Competitive Position: Nutresa has a strong competitive
position in Colombia's food industry, generating 60% of 2024
revenue, with a 50% market share. It maintains an almost 50% share
in key segments, contributing over 65% of its consolidated EBITDA.
This strength is supported by recognized brands, innovation, and an
extensive distribution network. Internationally, it ranks first or
second in markets like Chile and Mexico, with significant market
shares in Instant Cold Beverages.
ESG- Governance Structure: Grupo Nutresa S.A.'s majority
shareholder's decision to increase Nutresa's leverage to boost his
stake in the company weakens the latter's credit profile and
heightens key person risk, reducing the Board of Directors'
independence. Fitch believes the Gilinski Group is an experienced
and successful business and banking conglomerate that can, at
times, pursue business strategies that may not be aligned with the
interests of all stakeholders.
Peer Analysis
Nutresa has a more robust business profile than Alicorp
(BBB/Stable) in terms of geographical and product diversification,
but higher prospective leverage. Fitch anticipates Nutresa's net
leverage to increase to 4.5x in 2025 and for Alicorp to remain in
the 2.0x-2.5x range during the next couple of years. Nutresa has a
smaller scale, less diversification of products and brands, and a
weaker credit profile when compared to Nestle SA (A+/Stable) and
Grupo Bimbo, S.A.B. De C.V. (BBB+/Stable). Both Nestle and Bimbo
also have a greater geographic presence than Nutresa.
Key Assumptions
- Average revenue growth of 8.5% over the projection horizon;
- Total volume remains stable in 2025 compared to 2024;
- Average EBITDA margin of 14,5% (after adjustment for IFRS 16
defined by Fitch) and EBITDAR margin of 15.9%; EBITDA and EBITDAR
improve due to the execution of efficiency plans and optimization
initiatives.
- Capital investment intensity (capex/revenue) of 2.8% in average;
- Dividend payment in line with management's projections; 30% of
EBITDAR between 2026-2028
- Disbursement of a bridge loan for USD 2 billion;
- Bridge loan of USD2 billion is refinanced in 2025 with a USD2
billion 144A/ Reg S bond offering;
- USD2 billion is deposited in a bank as a CD;
- Alcora's capitalization;
- Shares repurchase of 4.580.000 shares at a price of COP130.000;
- Average exchange rate of COP4,412 per US dollar;
- Average YE rate of COP4,456 per US dollar.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Dividend distribution or value extraction mechanisms from the
company that pressure leverage and makes the FCF negative on a
sustained basis;
- Lower than anticipated operating performance, including a decline
in the company's revenues and margins;
- ore aggressive growth policy that includes acquisitions financed
mainly with debt;
- Net debt/EBITDAR above 4.0x on a sustained basis.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Net debt/EBITDAR below 3.0x on a sustained basis;
- Increased geographic diversification in investment-grade
countries;
- FCF margin over 3% on a sustained basis.
Liquidity and Debt Structure
Fitch projects that by YE 2025, cash and equivalents stand at
COP843.000 million and current maturities at COP560.437 million,
with a liquidity ratio of 1.5x. Fitch anticipates Nutresa will
maintain its financial flexibility in the short to medium term, as
the company has debt maturities distributed over time. Nutresa has
broad access to the local and international financial and capital
markets, which provides it additional liquidity to meet financing
needs. Fitch views the bank deposit of the USD2 billion proceeds
from the bridge loan as restricted cash, since it will be used for
the Nugil S.A.S transaction.
Issuer Profile
Grupo Nutresa S.A., founded in 1920, is Colombia's leading
processed food company with almost 49,000 employees, operating
across various units. It holds a strong market position due to its
dominant brands and wide distribution network in Latin America.
Summary of Financial Adjustments
Fitch uses the balance-sheet-reported lease liability as the
capitalized lease value when computing lease equivalent debt.
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
Grupo Nutresa S.A. has an ESG Relevance Score of '5' for Governance
Structure and Group Structure due to weak Board independence,
ownership concentration and related parties' transactions, which
has a negative impact on the credit profile, and is highly relevant
to the rating 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
----------- ------ -----
Grupo Nutresa S.A. LT IDR BB+ Downgrade BBB
LC LT IDR BB+ Downgrade BBB
=============
J A M A I C A
=============
JAMAICA: Only Two Bids Submitted for $2.5BB in Repurchase Offer
---------------------------------------------------------------
RJR News reports that the Bank of Jamaica has reported that only
two bids were submitted for the $2.5 billion in repurchase
agreements it offered to the market.
The BOJ said it accepted the two bids for the full amount it was
offering, according to RJR News.
The weighted average interest rate was 5.97% per annum while the
highest bid submitted was 6% per annum for two billion dollars, the
report notes. The lowest bid was 5.9% per annum for 500 million
dollars.
The bank said the next auction was scheduled for April 7, the
report relays.
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.
On Feb. 21, 2025, Fitch Ratings affirmed Jamaica's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB-', with a
positive rating outlook. 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 2024, S&P affirmed 'BB-/B' longterm foreign and local
currency sovereign credit ratings on Jamaica and revised outlook to
positive.
JAMAICA: Remittance Flows to Jamaica up by 3.9% in Jan., BoJ Says
-----------------------------------------------------------------
RJR News reports that the Bank of Jamaica has reported that
although remittance inflows to Jamaica increased by 3.9% to
US$255.5 million in January of this year, it lagged significantly
behind some other countries in the region.
During the same period, the flows to Guatemala surged by 23.8 per
cent and to Mexico by 12.3 per cent, according to RJR News.
On the other hand, there was only a 1.9% increase in remittance
flow to El Salvador, the report notes.
The central bank also revealed that remittance flows accounted for
only 17 per cent of GDP last year compared, with 24 per cent in
2021 during the Covid-19 pandemic, 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.
On Feb. 21, 2025, Fitch Ratings affirmed Jamaica's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB-', with a
positive rating outlook. 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 2024, S&P affirmed 'BB-/B' longterm foreign and local
currency sovereign credit ratings on Jamaica and revised outlook to
positive.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
NATIONAL INVESTMENT: Records $800 Million Loss for 2024
-------------------------------------------------------
Mya Quamie at Trinidad and Tobago Newsday reports that after
recording a $2 billion loss in 2023, the National Investment Fund
Holding Co Ltd (NIF) has recorded a loss of $814.5 million for the
financial year ending December 31, 2024.
This comes after the company recorded an increase in net income
from $84.1 million in 2023 to $145.1 million in 2024, according to
Trinidad and Tobago Newsday.
In its audited summary financial statements, NIF said its bonds
have also experienced steady dividends, the report notes.
"The NIF1 bond has been experiencing steady dividends due to its
well-balanced portfolio, which when combined with NIF2 bond
amounted to $411.8 million in 2024, an increase of $87.7 million or
27 per cent from the $324.1 million earned in the prior year," it
said, the report relays.
The statement said Republic Financial Holdings Ltd paid out overall
dividends of $5.70 per share, an increase of 9.6 per cent over 2023
dividends of $5.20 per share, the report notes.
Trinidad Generation Unlimited's dividends moved from $0.36 per
share to $0.49 per share, the report discloses.
Angostura Holdings Ltd paid dividends of $0.38 per share, an 8.5
per cent increase compared to $0.35 per share in 2023, recalls the
report.
One Caribbean Media Ltd paid out $0.21 per share compared to $0.20
received during 2023 while the West Indian Tobacco Company Ltd
distributed $0.87 per share in 2024 compared to $0.78 in 2023, the
report relates.
"We ended 2024 with an overall portfolio of $7.7 billion. Thus,
while the dividend performance has been significant, the portfolio
has been impacted by a general decline in stock market prices such
that the NIF1 portfolio valued in 2018 at $8.0 billion is currently
$6.90 billion with a coverage ratio of 1.8:1," NIF said, the report
discloses.
In the chairman's reports, Jennifer Lutchman said, "On behalf of
our directors, management and staff, I wish to sincerely thank our
bondholders for their continuing confidence in the company," the
report relays.
NIF was established in 2018 to monetise certain Clico assets as
well as a wholly owned state enterprise. Its portfolio is valued at
$7.941 billion comprising Angostura Holdings Ltd, One Caribbean
Media Ltd, Republic Financial Holdings Ltd, West Indian Tobacco
Company Ltd and Trinidad Generation Unlimited, adds the report.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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