250509.mbx

250509.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, May 9, 2025, Vol. 26, No. 93 Headlines A R G E N T I N A ARGENTINA: USD20-Billion IMF Loan Went Against Board Concerns B R A Z I L AZUL SA: Fitch Lowers Long-Term IDRs to 'CCC-' C A Y M A N I S L A N D S AADVANTAGE LOYALTY: Fitch Rates New Sr. Secured Debt Issuance 'BB+' C O L O M B I A SIERRACOL ENERGY: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Must Focus More on Renewable Energy Storage J A M A I C A JAMAICAN URBAN: Losses and Subsidies Currently at J$20 Billion P U E R T O R I C O CARMEN FRATICELLI: Court Values Residential Property at $135,000 ERC MANUFACTURING: Hires Jose L. Ortiz Torres as Accountant SILVER AIRWAYS: Airline at Risk of Permanent Closure T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Economy Will Grow Despite Global Uncertainties - - - - - ================= A R G E N T I N A ================= ARGENTINA: USD20-Billion IMF Loan Went Against Board Concerns ------------------------------------------------------------- Buenos Aires Times reports that the International Monetary Fund's latest jumbo loan to Argentina - a serial defaulter now led by a close Donald Trump ally - got a green light despite raising red flags for many of the lender's top decision-markers. About half of the 25 executive board chairs at the IMF had serious concerns about the US$20-billion deal, Buenos Aires Times relays, citing people familiar with the matter, who asked not to be identified discussing private matters. The credit will go to a country that's already by far the Fund's biggest debtor -- gobbling up more than one-third of its entire global lending -- and includes an unusually large US$12-billion chunk upfront, Buenos Aires Times notes. The main concern raised by the chairs was the outsize exposure to Argentina the Fund would take on, particularly with such large portion upfront, relates the report. The nation already owes the Fund US$41 billion, with principal repayments not due to start until mid-2026. Moreover, a persistent concern that's surrounded IMF lending ever since is that authorities might blow any funds they're offered in a defence of the peso, BA Times relates. US Treasury Secretary Scott Bessent downplayed that risk in a Bloomberg interview during his recent visit. The large war chest now available to Argentina lessens the chance it would need to intervene to prop up the currency, he said. Other issues raised by board members include the lack of domestic political support for the programme -- Milei signed an executive order rather than securing a majority in Congress -- the hurried timeline for its approval, and insufficient conditionalities given the exceptional size of the loan, the report relates. There are risks for the lender in handing over so much cash upfront in a programme that's essentially refinancing large existing debts, according to Brad Setser, a former senior official at the US Treasury, says the report. However, Rodrigo Valdes, the IMF's Western Hemisphere director, told reporters in Washington when asked about the story, "The programme for Argentina was approved by the executive board following a very rigorous evaluation," according to Buenos Aires Times. He added that the deal also reflected Argentine "authorities' very strong track record and commitment to stabilisation." 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. On April 11, 2025, the International Monetary Fund (IMF) approved a 48-month Extended Fund Facility (EFF) arrangement for Argentina totaling US$20 billion (or 479 percent of quota), with an immediate disbursement of US$12 billion, and a first review planned for June 2025 with an associated disbursement of about US$2 billion. The program is expected to help catalyze additional official multilateral and bilateral support, and a timely re-access to international capital markets. 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. =========== B R A Z I L =========== AZUL SA: Fitch Lowers Long-Term IDRs to 'CCC-' ---------------------------------------------- Fitch Ratings has downgraded Azul S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC', and its National Scale Rating to 'CCC-(bra)' from 'CCC(bra)'. Fitch has also downgraded Azul Secured Finance LLP's senior secured notes to 'CCC-' with a Recovery Rating of 'RR4' from 'CCC'/'RR4' and Azul Investments LLP's unsecured notes t to 'C'/'RR6' from 'CC'/'RR6'. The downgrades reflect Azul's limited financial flexibility to access liquidity outside its ongoing debt renegotiations with existing bondholders and inability to effectively improve liquidity. The overall credit risk aversion scenario presents additional challenges for Azul in completing its debt restructuring and enhancing liquidity as planned. Despite operational improvements, Azul has faced difficulties finalizing the equity portion of its debt restructuring and securing new sources of liquidity at more reasonable terms, which were essential to funding its negative free cash flow in the first half of 2025. Key Rating Drivers Inability to Effectively Improve Liquidity: Azul's rating has been downgraded to 'CCC-' due to its inability to secure the necessary financing to enhance liquidity and support negative free cash flow during the first half of 2025. The company aimed to raise USD200 million through a follow-on equity issuance, as part of a debt restructuring plan, which included a final conversion of 12.5% of its debt. In addition, Azul had intended but has been unable thus far to access relevant credit lines, including those from ABGF (Agencia Brasileira Gestora de Fundos Garantidores e Garantias), to improve its overall liquidity. Ongoing Discussion with Bondholders: Azul has announced a deal to secure short-term financing of approximately BRL600 million from existing bondholders to help address the expected cash burn during this first half of 2025. The proposed notes have a six-month maturity and are prepayable if Azul receives any public-backed financing. They are secured by certain credit and debit card receivables generated by its passenger airline business, and issuance did not require any amendment or waiver. This new issuance follows the final part of the company's broader restructuring plan, which was unveiled in later in 2024. As part of this plan, 35% of the notes due in 2029 and 2030 were converted into preferred shares, while the additional 12.5% equitization, subject to a USD200 million follow-on, is still pending. Cash Flow Burn: Despite expected improvements in operating cash flow, Azul's high interest and rental expenses burden remains a threat to its free cash flow generation in the immediate term. In its base case, Fitch had Azul's EBITDA at around BRL7.2 billion during 2025 and lease rental, interest, and capex projected to total BRL8 billion in 2025. Given the business' seasonality, the first half of the year would be responsible for a great part of this negative free cash flow generation. The recent decline in fuel prices will most likely have a positive impact on results for the second half of the year as well. Peer Analysis Azul has a weaker position relative to global peers given its limited geographic diversification, higher operating leverage and weaker financial flexibility. In terms of regional peers, it has a weaker position than LATAM Airlines Group S.A. (BB/Positive) and Avianca Group International Limited (B/Stable) in business diversification, liquidity and financial flexibility. In contrast to LATAM and Avianca, Azul has not completed a debt haircut as part of its post-pandemic restructuring. Azul's strong position in the Brazilian regional market and high operating margins have been a key factor in the analysis. Foreign exchange risk is a negative credit factor, considering its limited geographic diversification. Fitch expects LATAM and Avianca to maintain gross leverage of about 2.5x and 3.5x, respectively, in the next two years, while Azul's credit metrics should be around 5.0x in 2025. Azul's leasing and interest burden and capex program significantly increase the risks associated with funding its sizable negative FCF. Key Assumptions - Fitch's base case during 2025 and 2026 includes an increase in ASK by 6% and 11%, respectively, and an increase in RPK by 6% and 10%, respectively; - Load factors around 80%-81% during 2025 and 2026; - Adjusted EBITDAR margins of around 30%-32% in 2025 and 2026; - Capex of BRL1.4 billion in 2025 and BRL2.0 billion in 2026. Recovery Analysis The recovery analysis assumes that Azul would be considered a going concern in bankruptcy and that the company would be reorganized rather than liquidated. Fitch has assumed a 10% administrative claim. Going Concern Approach Azul's going concern EBITDA is BRL2.5 billion, which incorporates the low-end expectations of Azul's EBITDA post-pandemic, adjusted by lease expenses, and a discount of 20%. The going concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level on which Fitch bases the valuation of the company. The enterprise value (EV)/EBITDA multiple applied is 5.5x, reflecting Azul's strong market position in Brazil. Fitch applies a waterfall analysis to the post-default EV, based on the relative claims of the debt in the capital structure. The debt waterfall assumptions consider the company's total debt as of Dec. 31, 2024. These assumptions result in a recovery rate for the first-lien and superpriority secured bonds within the 'RR1' range and second-lien secured notes within the 'RR2' range. However, due to the soft cap of Brazil at 'RR4', Azul's senior secured notes are rated at 'CCC-'/'RR4'. For the unsecured notes, the recovery is in the 'RR6' range, resulting in a rating of 'C'/'RR6'. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A downgrade could occur if Fitch believes that a default or default-like process appears probable or has begun, with an announcement of debt restructuring or refinancing with weaker terms to creditors. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade of Azul's ratings is unlikely until the company addresses its short-term refinancing needs and liquidity concerns. Liquidity and Debt Structure Azul's short-term maturities totaled BRL8.5 billion (BRL2.2 billion of financial debt and BRL6.3 billion of leasing obligations) as of Dec. 31, 2024. Azul's readily available cash, per Fitch's criteria, declined to BRL1.3 billion from BRL1.9 billion at the end of December 2023. According to Fitch's estimates, Azul would not be able to generate enough cash flow and lacks sufficient liquidity to fulfill those obligations without new money. Total debt was BRL31.2 billion, and primarily consists of BRL17.3 billion of leasing obligations, BRL977 million of the bridge notes due 2025, BRL196 million of cross-border senior unsecured notes due 2026, and BRL11.4 billion of secured issuances due 2028, 2029 and 2030. Issuer Profile Azul is one of Brazil's largest airlines, dominating the regional market and serving as the sole carrier on 82% of its routes. In 2024, 93% of its revenues came from passengers, while 7% came from cargo and other sources. 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 Recovery Prior ----------- ------ -------- ----- AZUL Investments LLP senior unsecured LT C Downgrade RR6 CC Azul S.A. LT IDR CCC- Downgrade CCC LC LT IDR CCC- Downgrade CCC Natl LT CCC-(bra)Downgrade CCC(bra) Azul Secured Finance LLP senior secured LT CCC- Downgrade RR4 CCC Senior Secured 2nd Lien LT CCC- Downgrade RR4 CCC super senior LT CCC- Downgrade RR4 CCC =========================== C A Y M A N I S L A N D S =========================== AADVANTAGE LOYALTY: Fitch Rates New Sr. Secured Debt Issuance 'BB+' ------------------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB+' with a Recovery Rating of 'RR1' to American Airlines, Inc.'s (B+/Stable Outlook) proposed senior secured debt issuance. The debt will be issued by AAdvantage Loyalty IP Ltd.. The new issuance will rank pari passu with American's existing loyalty-program secured term loan and notes. American's ratings are supported by its robust business profile and strong competitive position in the consolidated U.S. airline industry. American's credit metrics remain pressured by operating margin underperformance relative to peers. The Stable Outlook incorporates Fitch's expectations for leverage to trend lower over time. Key Rating Drivers Loyalty Program Debt Issuance: American plans to issue incremental loyalty program debt financings, with proceeds intended to repay near-term maturities, fund the reserve account, and support general corporate purposes. The 'BB+' rating on American's loyalty program debt is supported by valuation estimates for the plan assets and the plan's strategic importance to American, which would incentivize the company to affirm these obligations in a hypothetical bankruptcy scenario. The new issuance is expected to bring American's total loyalty program debt to under $8 billion, remaining below the original issuance size of $10 billion. The new term loan contains certain term changes to American's existing loyalty debt, such as revised DSCR tests, and definitions around debt incurrence. These changes do not affect Fitch's ratings. The term changes require consent from existing AAdvantage debtholders or the repayment of the existing AAdvantage debt to take effect. Leverage Temporarily Elevated: Fitch expects leverage to rise modestly in 2025 due to margin pressure from a soft demand environment, but expects it to decline over the longer term, trending toward the mid-4x range over the next two years, primarily driven by debt reduction. Fitch calculates American's EBITDAR leverage at 5x at YE 2024, at the high end of Fitch's negative leverage sensitivity. American's ratings could be under pressure if a downturn proves deeper than expected, potentially increasing gross debt and pushing leverage expectations beyond 2025. American's focus on paying down debt is supportive of the rating. The company reached its prior goal of reducing total debt by $15 billion (including pension liabilities) from peak levels ahead of schedule. It also moved up its prior goal of bringing total debt below $35 billion by a year, from YE 2028 to YE 2027 and is publicly committed to achieving 'BB' metrics and ratings. Fitch views American's debt reduction goal as achievable given projected FCF over the next three years. Positive FCF: Manageable capex over the next several years will aid American's efforts to generate FCF. Aircraft deliveries are manageable for the foreseeable future, as the company completed its fleet renewal program prior to the pandemic. The company has guided to total capital spending of $3 billion-3.5 billion in 2025, a level that remains lower than its peers. Fitch expects FCF to be lower than its prior forecast due to margin pressures but to remain positive for the next three years, allowing for continued debt reduction. Margin Underperformance: Fitch projects margins may decline modestly in 2025 before rebounding in 2026. The forecast assumes low single-digit unit revenue declines in 2025 driven by consumer pressures and uncertainty on travel bookings. Unit revenue pressures may be partly offset by lower fuel prices, which have declined recently due to macroeconomic concerns. Fitch expects American's margins will continue to underperform its network peers. However, there is potential for improvement beyond 2025 as the company sees benefits from its renewed co-branded credit card agreement, recovers historical share of indirect channel revenue, and some cost pressures ease. Demand Environment Favors Network Carriers: Fitch anticipates that American, while less well positioned than Delta and United, will outperform low-cost competitors in the current environment. Fitch expects legacy carriers like American to benefit as unprofitable airlines reduce capacity in response to softer demand. American's diversified revenue streams, including a strong loyalty program, and its broad route networks appeal to a wider group of travelers. Additionally, international traffic and premium travel are likely to remain relatively resilient compared to low-cost leisure travel, further supporting American's competitive position. Financial Flexibility: American's financial flexibility remains supportive of the rating. At YE 2024, American maintained over $10 billion in total liquidity. It also has a material balance of unencumbered assets that can be leveraged to bolster liquidity if needed. American's loyalty program debt financing amortizes rapidly in the coming years, freeing up the potential to re-tap those assets. Debt payments are material, totaling between $4.2 billion and $5.3 billion annually between 2025 and 2028. Fitch views American's maturities as manageable given current liquidity and available assets. Peer Analysis American is rated below its network peers United Airlines (BB/Positive) and Air Canada (BB/Stable). The rating differential reflects lower leverage and moderately better profit margins for both peers. In the near-to intermediate term, Fitch expects United and Air Canada's adjusted leverage to remain in the mid-3x range, compared to around 5x-6x for American. Leverage differences are partly countered by better FCF generation prospects for American relative to United, driven by its more limited upcoming capital spending requirements. Business profiles are similar for American and United. While Air Canada is smaller and more exposed to long-haul traffic than its U.S. peers, it benefits from operating in a largely duopolistic market. American is rated one notch above JetBlue (B/Negative). JetBlue's ratings suffer from elevated leverage driven by weak profitability, along with a more difficult competitive position as a smaller operator in a consolidated market. Key Assumptions - Roughly flat traffic in 2025 followed by low single digit growth thereafter; - Low single digit unit revenue decline in 2025 followed by low single digit growth thereafter; - Jet Fuel at around $2.35/gallon in 2025 and rising to $2.40 thereafter; - Low single digit FCF generation in each of the next three years; - Capital expenditures in line with the company's estimates. Recovery Analysis Fitch's recovery analysis assumes that American would be reorganized as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which it bases the enterprise valuation. Fitch uses a GC EBITDA estimate of $5.5 billion and a 5.0x multiple generating an estimated GC enterprise valuation (EV) of $27.5 billion. The GC EBITDA estimate is reflective of a scenario in which an American bankruptcy is driven by an untenable capital structure. Fitch would not anticipate American shrinking in a material way in a reorganization due to the company's strong position in key hubs and its young asset base. Fitch's estimate considers a scenario where margins are structurally lower than historical precedents potentially due to a combination of higher operating costs (labor, fuel, etc.). and increasing competition. An EV multiple of 5.0x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. The choice of this multiple considered the following factors: historical bankruptcy case studies with exit multiples for peer companies ranging from 3.1x to 6.8x. The selection of a multiple towards the mid-point of the range is supported by American's large scale and its entrenched position in key hubs. These assumptions lead to an estimated recovery of 'RR1' for American's loyalty program debt and recovery of 'RR2' for senior secured debt positions. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Adjusted debt/EBITDAR sustained above 5x or EBITDAR/gross interest + rent trending below 1.5x; - Total liquidity falling toward or below $8 billion absent a corresponding decrease in outstanding debt; - EBITDAR margins deteriorating to the low double-digit range; - Persistently negative or negligible FCF. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Continued progress toward American's stated debt reduction goals, bringing adjusted debt/EBITDAR towards or below 4x; - EBITDAR/gross interest + rent trending toward 2.5x; - Sustained neutral FCF or higher. Liquidity and Debt Structure As of March 31, 2025, American held $10.8 billion in liquidity, consisting of $6.6 billion short-term investments, $835 million in cash and cash equivalents, and full availability on their $3.3 billion aggregate revolving credit facilities maturing in 2029. Total liquidity, including undrawn revolver capacity, is equivalent to 19.9% of LTM revenue. American's liquidity is down from over $14 billion a year ago largely reflecting cash directed toward debt reduction. Liquidity is around American's medium-term target of approximately $10 billion and provides significant cushion against near-term market weakness. Principal payments remain around $4 billion-$5 billion annually through 2028. Refinancing risk has decreased over the past year as American has taken steps to address its 2025 debt tower, which once stood at over $9 billion. Fitch expects American to address maturities through a combination of FCF and borrowing against new deliveries. The company also has options to leverage unencumbered assets or to re-tap existing secured financings if needed to address debt payments as they come due. Issuer Profile American Airlines Group was formed out of the merger between American Airlines and US Airways in 2013. The company is the world's second largest airline by available seat miles. Date of Relevant Committee 25 April 2025 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 Recovery ----------- ------ -------- AAdvantage Loyalty IP Ltd. senior secured LT BB+ New Rating RR1 =============== C O L O M B I A =============== SIERRACOL ENERGY: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed SierraCol Energy Limited's Long-Term Foreign and Local Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. Fitch has also affirmed SierraCol Energy Andina, LLC's Long-Term senior unsecured ratings at 'B+' with a Recovery Rating of 'RR4'. SierraCol's ratings reflect its modest but stable low-cost production profile of roughly 44,800 boed in 2024, which is balanced across its two main assets in Caño Limon area and La Cira Infantas. With a standing operational history in Colombia, Fitch expects SierraCol to maintain solid production, averaging a gross 45,000 boed over rating horizon, and a 1P reserve life averaging 7.0 years. The company has a strong leverage profile, which Fitch expects to remain at or below 2.0x over the rating horizon. Despite strong operating metrics, the ratings remain constrained by the company's relatively small size and the low diversification of its oil fields. Key Rating Drivers Small Production Scale: SierraCol's ratings are constrained by its production size, projected to average 45,000 boed over the next four years, which falls below the 75,000 boed rating threshold for the 'BB' category. The company's production is concentrated, with 90% coming from its main assets in Caño Limon area and La Cira Infantas, with Ecopetrol S.A. (BB+/Negative) as a partner in both assets. SierraCol produces high-quality crude, with 94% having an API gravity between 25-35, allowing for preferential local sales to Ecopetrol under contracts that secure pricing above the Vasconia discount. Cost Efficient: SierraCol's costs are in line with producers in conventional assets in Latin America. Fitch estimates its half-cycle costs at USD25/boe and full-cycle costs at USD41/boe for 2024. Fitch's full-cycle cost calculation includes the half-cycle cost, a three-year average FD&A for 1P of USD14/boe, and a 15% return on capital investment at USD2/boe. The company benefited from a realized oil price of USD74/bbl in 2024, higher than peers due to the superior quality of its crude. In addition, it benefited from low transportation costs of USD1/boe, stemming from a legacy contract with Ecopetrol. Strong Leverage Metrics: Fitch expects SierraCol's total debt/EBITDA ratio to remain at or below 2.0x over the rating horizon, with no significant changes in debt levels anticipated. The company's debt-to-proved, developed, and producing (PDP) reserves is projected at USD11/boe, and total debt/1P at USD8/boe in 2025, decreasing to USD10.5/boe and USD7.7/boe by 2027. These projections assume an average reserve replacement ratio of 101% for both PDP and 1P, with an average reserve life of five and seven years, respectively, supported by an estimated average capex of USD165 million annually. Financial Flexibility: Fitch expects SierraCol to finance all capex projects with internal cash flows. Based on Fitch's price deck and production forecasts, cash flow from operations (CFO) should cover capex by more than 1.9x over the next four years. As of December 2024, the company had adequate liquidity, with USD91 million in cash and cash equivalents, plus USD115 million in undrawn committed credit lines. Its primary debt obligation is a USD600 million bond maturing in June 2028. The rating scenario anticipates annual dividends to the controlling shareholder, the Carlyle Group, but Fitch does not foresee dividends significantly surpassing FCF. Peer Analysis SierraCol's credit and business profile is comparable with other independent oil producers in Colombia. GeoPark Limited (B+/Stable), Frontera Energy Corporation (B/Stable), and Gran Tierra Energy Inc. (B+/Stable) are all constrained to the 'B' category, given the inherent operational risk associated with small scale and low diversification of their oil and gas production. SierraCol's production profile compares favorably with other 'B' rated oil exploration and production companies operating in Colombia. SierraCol's gross production averaged 44,800 boed in 2024, higher than Geopark's 34,000 boed, Gran Tierra's 34,700 boed, and Frontera's 39,700 boed. SierraCol's 1P reserve life of 6.6 years in 2024 is below Frontera's 7.3 years and Gran Tierra's 6.9 years. SierraCol's strong capital structure is expected to have a gross leverage that will be at or below 2.0x over the rated horizon and debt/PDP of USD11/boe and total debt/1P of USD8/boe, which is lower than most peers in Latin America. Key Assumptions - Fitch's price deck for Brent of $65 for 2025-2027 and $60 for 2028; - Average daily gross production of 45,000 boed from 2025 through 2028; - Reserve replacement ratio of 101% per annum over the rated horizon; - Lifting and transportation cost average of $19boe over the rated horizon; - SG&A cost average of $3.1boe over the rated horizon; - Consolidated capex to average $180 million annually for the years 2025 and 2026, and $150 million annually for 2027 and 2028; - Minimum cash balance assumed at $100 million over the rated horizon; - Effective tax rate of 35% over the rated horizon. Recovery Analysis The recovery analysis assumes that SierraCol would be a going concern (GC) in bankruptcy and that it would be reorganized rather than liquidated. GC Approach: - A 10% administrative claim. - The GC EBITDA is estimated at USD431 million. The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of SierraCol. - Enterprise valuation multiple of 4.0x. With these assumptions, Fitch's waterfall generated recovery computation (WGRC) for the senior unsecured notes and unsecured loan are in the 'RR3' band. However, according to Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the Recovery Rating for corporate issuers in Colombia is capped at 'RR4'. The Recovery Rating for the senior secured notes and unsecured loan are therefore 'RR4' with 50% recoveries in a hypothetical event of default. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Net production rising consistently to 75,000 boed on a sustained basis while maintaining a total debt to 1P reserves of USD5.00 barrel or below; - Reserve life is unaffected as a result of production increases, at approximately seven to eight years. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Extraordinary dividend payments that exceed FCF and weaken liquidity; - Sustainable net production falls below 30,000 boed; - Reserve life declines to below 6.0 years on a sustained basis; - A significant deterioration of total debt/EBITDA to 3.0x or more. Liquidity and Debt Structure SierraCol's cash and cash equivalents balance as of December 2024 was USD91 million, plus USD115 million in undrawn amounts of committed credit lines. Total available liquidity covers interest expense of the next four years by 1.0x. Fitch projects that capex will be funded with internal cash flows with no material increases nor reductions in total debt. SierraCol has a favorable debt maturity profile, where USD50 million matures in the current year and USD714 million mature in the long term, which includes its USD600 million senior notes maturing in June 2028. During July 2024, the Company drew USD74 million from its loan with Bancolombia S.A. to finance the acquisition of Cepsa Colombia S.A.'s assets. Additionally, the Company borrowed USD40 million from Davivieda to fund the acquisition of the 25% non-controlling interest in SierraCol Energy Arauca LLC in February 2025. Issuer Profile SierraCol Energy Limited is an independent oil producer created after Carlyle acquired Occidental Petroleum Corporation's operations in Colombia in December 2020. SierraCol is the third largest oil producer in Colombia with assets in the Llanos, Middle Magdalena, and Putumayo basins. 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 SierraCol Energy Limited has an ESG Relevance Score of '4' for GHG Emissions & Air Quality due to 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 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 Recovery Prior ----------- ------ -------- ----- SierraCol Energy Limited LT IDR B+ Affirmed B+ LC LT IDR B+ Affirmed B+ SierraCol Energy Andina, LLC senior unsecured LT B+ Affirmed RR4 B+ =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Must Focus More on Renewable Energy Storage --------------------------------------------------------------- Dominican Today reports that according to the Minister of Energy and Mines, Joel Santos, the Dominican Republic has several renewable energy projects under development. Still, he understands that the country must continue to advance in managing this energy to make the best use of it, the report notes. "Renewable energy is very important and positive, but it also requires greater coordination between the different energy sources in order to take advantage of them," he said while leading an event on renewable energy, which featured Francesco La Camera, director general of the International Renewable Energy Agency, as a speaker, according to Dominican Today. He said that with the introduction of renewable energy, the energy supply will continue to increase, and the matrix will diversify. However, as the matrix increases and diversifies, more work will be required to coordinate each energy source, the report relays. Santos also pointed out that the storage of these energies must be worked on significantly, the report discloses. "As our renewable energy is mainly solar, although we also have wind power, storage sources are required, and we are working on this aspect so that it can be used during peak hours," he added, notes the report. He recalled that renewable energy has experienced key growth in the country, going from 555 megawatts installed in 2020 to more than 1,300 megawatts last year, the report discloses. "Growth has doubled. In addition to the 600 megawatts that will come online this year, it is expected to double again by 2028," the Minister of Energy reiterated, the report relays. Acceleration At the event, Francesco La Camera emphasized that Latin American and Caribbean countries, such as the Dominican Republic, must accelerate their transition to renewable energy, the report says. He also pointed out that the Dominican Republic has great potential in renewable energy. "We have to accelerate our progress if we want to triple the installed capacity of renewable energy," he explained, the report notes. He said tripling the installed capacity would mean more energy by 2030 and significantly reduced CO2 emissions, and that Latin America and the Caribbean must install twice as much renewable energy as Irena obtained last year. The renewable energy expert also highlighted the importance of defining energy regulations, the report relays. "We cannot delay regulation," he said. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. S&P Global Ratings affirmed its 'BB' long-term foreign and local currency sovereign credit ratings on the Dominican Republic on December 3, 2024. The outlook remains stable. S&P also affirmed its 'B' short-term sovereign credit ratings and kept the transfer and convertibility (T&C) assessment unchanged at 'BBB-'. Fitch, on November 26, 2024, affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'. The Rating Outlook is Positive. Moody's credit rating for Dominican Republic was last set at Ba3 in August 2023 with the outlook changed to positive. ============= J A M A I C A ============= JAMAICAN URBAN: Losses and Subsidies Currently at J$20 Billion -------------------------------------------------------------- RJR News reports that the Jamaica Urban Transit Company's losses and subsidies are currently running at J$20 billion, or 0.66 % of GDP, while the amount of money collected from tickets or the fare box is $1.5 billion, compared with $3 billion in 2016. The company now deploys about 200 buses per day, compared with 400 per day in 2016 but its operating expenses remain the same, according to RJR News. This has prompted Opposition Spokesman on Transport Mikael Phillips to suggest that the JUTC should have undergone significant restructuring, including increasing its fleet and reducing its operating costs and losses, before expanding its operations into rural areas, the report notes. About Jamaica Urban Transit Company Jamaica Urban Transit Company was established in 1998 to provide a centrally managed state-of-the-art public bus service. The government invested US6 billion aiming to have an efficient transport system and for the Jamaican people. ===================== P U E R T O R I C O ===================== CARMEN FRATICELLI: Court Values Residential Property at $135,000 ---------------------------------------------------------------- Judge Maria de los Angeles Gonzalez of the United States Bankruptcy Court for the District of Puerto Rico concludes that Carmen Maria Mercado Fraticelli's residential property located in San Gerardo Street in the Santa Teresita Development in Ponce, Puerto Rico has a value of $135,000. On May 31, 2024 Carmen Maria Mercado Fraticelli filed the instant petition for relief under Chapter 11, SubChapter V of the Bankruptcy Code. Pending before the Court is a motion filed by the Debtor on Oct. 22, 2024 requesting the valuation of the property for purposes of 11 U.S.C. Sec. 1129(b)(2)(A)(i), 11 U.S.C. Sec. 506(a) and Fed. R. Bankr. P. 3012. Such request was made after Blue View Capital LLC filed an objection to the confirmation of the plan alleging, in part, that the value of their collateral was higher than the one provided in the plan and that Debtor had not set forth admissible evidence regarding the value of the collateral. The Debtor submitted an appraisal report prepared by Real Estate Appraiser Milton Flores, dated Oct. 12, 2024, which valued the property at $125,000. Conversely, Blue View submitted an appraisal report from Real Estate Appraiser Carlos Xavier Velez, dated Nov. 25, 2024, showing that the property is valued at $178,500. Confirmation of Debtor's amended plan dated Oct. 22, 2024 hinges on the valuation of the property. On May 31, 2024, Debtor filed a voluntary chapter 11 petition as a SubChapter V case and listed the property as her only real estate property in schedule A/B with a value of $125,000. The Debtor listed Blue View in schedule D as having a claim in the amount of $123,154.15, secured with a lien over the property. On Aug. 5, 2024, Blue View filed proof of claim number 1 in the amount of $283,593.07 for a loan secured by the property. On Aug. 30, 2024, Debtor filed her plan or reorganization. This plan proposed payment to Blue View's secured portion of the claim in the amount of $125,000 in 120 installments of $1,515.63 with 8% interest. The plan also proposed payment to Blue View for the unsecured portion of its claim in the amount of $220.27 for 36 months. On Oct. 22, 2024, Debtor filed an amended SubChapter V plan, a memorandum of law against dismissal, and a motion requesting a valuation hearing under Fed R. Bankr. P. 3012 to establish the value of the property. The Debtor's amended plan proposes payment of Blue View's secured portion of the claim in the amount of $125,000 in 180 installments of $1,194.57 with 8% interest for a total payout of $215,055.66. The amended plan also proposes payment of Blue View's unsecured portion of the claim in the amount of $482.50 for 60 months. A valuation hearing was held on Dec. 5, 2024, during which the Court heard expert testimony from both appraisers. The Court will assign more weight to Debtor's appraisal as the more conservative compared to Blue View's, while acknowledging that Debtor's report does not contemplate that the property could generate income. The Court considers Blue View's valuation of $178,500 overly aggressive and based on inaccurate numbers. In recognition that valuation is an inexact science, the Court concludes that based on the testimony and the documentary evidence presented at the valuation hearing, the property has a value of $135,000. The Debtor is granted thirty (30) days from the entry of this order to file a new SubChapter V plan with the Court consistent with this order. A copy of the Court's decision dated April 14, 2025, is available at https://urlcurt.com/u?l=CuR7hs from PacerMonitor.com. Carmen Maria Mercado Fraticelli filed for Chapter 11 bankruptcy protection (Bankr. D.P.R. Case No. 24-02341) on May 31, 2024, listing under $1 million in both assets and liabilities. The Debtor is represented by Juan Carlos Bigas Valedon, Esq. ERC MANUFACTURING: Hires Jose L. Ortiz Torres as Accountant ----------------------------------------------------------- ERC Manufacturing, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Mr. Jose L. Ortiz Torres, a professional practicing in Puerto Rico, as accountant. The professional will provide these services: a. close out the Debtor's books as of the date of the filing of this case, and to open new books as of the next thereafter; b. establish a new bookkeeping system to replace the system heretofore used by the Debtor; c. prepare the periodic statements of the Debtor in Possession's operations as required by the rules of this court; d. prepare and file Debtor's state and federal tax return for the fiscal year which ended in the semester prior to the date of the filing of this case; e. prepare General Ledger and Disbursements Register; f. reconcile the account; g. prepare Certified Interim Financial Statement as needed; h. prepare annual Financial Statements and Returns; i. tax and management counseling; j. representation in taxes investigations; and k. generate the monthly Operation reports. Mr. Torres will be paid at $300 per month. He will also be reimbursed for reasonable out-of-pocket expenses incurred. Mr. Torres disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. He can be reached at: Jose L Ortiz Torres 368 Calle De Diego 1108, Apt 1108 San Juan, PR 00923 Tel: (787) 566-7397 About ERC Manufacturing, Inc. ERC Manufacturing Inc. owns the property located at Carr 814 Km 0.8 Cedro Abajo, Naranjito, Puerto Rico, spanning 6,977.84 square meters. It includes a two-story commercial office building, two metal concrete industrial buildings, 28 parking spaces, two offices, two terraces, two workshops, two mezzanines, and two bathrooms. The appraised value is $213,000, as of July 27, 2016. ERC Manufacturing Inc. sought relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case No. 25-00475) on February 4, 2025. In its petition, the Debtor reports total assets of $785,322 and total liabilities of $1,599,734. The Debtor is represented by Juan C. Bigas, Esq., in Ponce, Puerto Rico. SILVER AIRWAYS: Airline at Risk of Permanent Closure ---------------------------------------------------- Jordan Simon of Men's Journal reports that Silver Airways, a regional carrier based in Florida once known for connecting smaller U.S. cities and offering flights to the Caribbean, is teetering on the edge of closure due to mounting financial and legal troubles. According to Aviation Source News, the airline has filed for Chapter 11 bankruptcy after accumulating more than $500 million in debt. However, the U.S. trustee overseeing the case has recommended dismissal, citing the airline's restructuring plan as unworkable. Continued losses, persistent negative cash flow, and the inability to secure debtor-in-possession financing have cast serious doubt on the airline's viability. Customers with reservations through August 2025 are facing cancellations, and refund options remain unclear. In the event of liquidation, passengers may struggle to recover their money, as creditors will be prioritized. Staying informed through court updates and considering travel insurance is strongly advised, the report states. Silver Airways is also dealing with outstanding debts. The airline reportedly owes nearly $104,000 in fees to Anguilla's airport, while several other airports - including Tallahassee, Tampa, Key West, and San Juan - are pursuing legal action over unpaid passenger facility charges, placing further strain on key partnerships. Service levels have sharply declined. In March 2025, Silver abruptly suspended all flights to and from Orlando International Airport, stranding travelers. Several routes, including service to Dominica, have been cut, and operations in various Florida cities have been scaled back, according to Men's Journal. About Silver Airways LLC Silver Airways LLC is a regional U.S. airline operating flights between gateways in Florida, the Southeast and The Bahamas. The Silver Airways fleet is comprised of modern, state of the art aircraft with reliable, fuel-efficient turbo-prop engines. In the summer of 2018, Silver completed the acquisition of Seaborne Airlines, a San Juan, Puerto Rico-based air carrier serving destinations throughout Puerto Rico, the U.S. Virgin Islands, and other countries in the Caribbean. Seaborne provides connections throughout the Caribbean via the carrier's hub in San Juan, while also serving as the most critical link between St. Croix and St. Thomas with the carrier's seaplane operation. Silver Airways LLC sought relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D. Fla. Case No. 24-23623) on December 30, 2024. In the petition filed by Steven A. Rossum, as chief executive officer, the Debtor reports estimated assets and liabilities between $100 million and $500 million each. The case is assigned to Hon. Peter D Russin. The Debtor's counsel is Brian P. Hall, Esq., at SMITH, GAMBRELL & RUSSELL, LLP, in Atlanta, Georgia. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Economy Will Grow Despite Global Uncertainties ----------------------------------------------------------------- Joel Julien at Trinidad Express reports that Trinidad and Tobago's economy is expected to grow steadily, despite an increasingly uncertain global environment, according to the Central Bank's 2024 Annual Economic Survey released early this month. "Lower gas supplies could, if the decline is unchecked, constrain the expansion of energy production, with spillovers on the fiscal position and reserve accumulation, while non-energy activity is anticipated to remain buoyant," the Central bank stated, according to Trinidad Express. "Domestic demand pressures on headline inflation are expected to remain low, although widening trade tensions globally can result in higher imported inflation." According to the Central Bank, the indicators it monitors suggest that domestic economic activity expanded in 2024, as the "resilience" of the non-energy sector offset "waning" output from the energy sector, the report relays. The Central Bank also reported that inflationary pressures continued to ease in 2024, supported by lower international food prices and greater availability of locally grown agricultural produce, the report notes. "During 2024, headline inflation slowed to an average of 0.5%, down from 4.6% recorded in 2023. The deceleration in headline inflation was broad-based, occurring across various administrative areas. Food inflation decelerated to an average of 1.5% in 2024 compared to 7.7% in 2023. Meanwhile, core inflation slowed to 0.2% in 2024 from an average of 3.9% one year prior," it stated, notes the report. The Central Bank stated that data from the Central Statistical Office (CSO) showed an increase of 0.3% (year-on-year) in real GDP during the first nine months of 2024, the report relays. Decreasing Production Persisted "Central Bank estimates suggest stronger activity in both the energy and non-energy sectors during the fourth quarter of 2024, underpinning the assessment of overall positive growth for 2024. This follows the positive performance of 2023, wherein real GDP expanded by 1.4%," it stated, the report notes. The Central Bank stated that data from the Ministry of Energy and Energy Industries suggests that the trend of decreasing energy sector output persisted in 2024, despite a surge in production in the second half of the year, the report discloses. "Over the period, energy sector activity was adversely affected by declining upstream production. Reductions were reported in the production of both crude oil (-5%) and natural gas (-1.6%). Effects of lower natural gas production filtered through to the production of liquefied natural gas (LNG) which declined by 4.3% in 2024," it said, notes the report. "Activity in the Refining sub-sector remained relatively steady, supported by a sizable improvement in the production of natural gas liquids (NGLs) (15%). Further downstream, an uptick in the output of nitrogenous fertilisers reflected a base effect given plant closures and maintenance efforts in 2023. Resultantly, ammonia and urea production improved by 4.1% and 48.7%, respectively. Activity in the Petrochemicals sub-sector was, however, hampered by a falloff in methanol production (-6.7%) in 2024," the Central Bank added, the report relays. The Central Bank further stated that estimates suggest that economic activity in the non-energy sector remained buoyant in 2024, the report notes. "Data from the CSO indicates that the non-energy sector expanded by 1% (year-on-year) over the first nine months of 2024. This reflected positive growth in several sectors. Notable among these were Manufacturing (excluding Refining and Petrochemicals) (12.9%); Financial and Insurance Activities (2.6%); and Wholesale and Retail Trade (excluding Energy) (1.2%)," it said, the report relays. "Positive growth in these sectors outweighed a reduction in the Construction sector (-8.9%t). Indicators monitored by the Central Bank suggest that the positive nonenergy sector performance extended into the fourth quarter of 2024. On a sectoral basis, estimates point to heightened activity in the Construction, Financial and Insurance Activities, Wholesale and Retail Trade (excluding Energy) and Agriculture sectors. Conversely, activity in the Electricity and Water (excluding Gas) and Transportation and Storage sectors declined in the fourth quarter of 2024. In the case of the former, reductions stemmed from a falloff in water supply, which outweighed improved power generation during the period," it stated, the report discloses. Unemployment Increased to 5% According to the Central bank, official labour market statistics from the CSO indicated that the unemployment rate increased to 5% in 2024, higher than the 4% recorded in 2023, the report notes. "The labour force contracted by 7.1 thousand persons as the number of persons with jobs fell by 12.7 thousand persons, while the number of persons unemployed (persons without jobs and actively seeking employment) increased by 5.5 thousand persons, the report relays. Consequently, the labour force participation rate declined to 55.1% in 2024, from 55.6% recorded in 2023," it said, notes the report. The Central Bank further noted that notwithstanding the increase in unemployment, retrenchments declined in 2024, the report relates. "For the period January to December 2024, retrenchment notices filed at the Ministry of Labour indicated that 211 persons were retrenched, compared to 467 persons during 2023," it stated, the report says. "In 2024 reported job separations occurred in the Manufacturing (92 persons), Distribution (74 persons), Petroleum and Other Mining (18 persons), Finance, Insurance and Real Estate (15 persons), Transport, Communication and Storage (9 persons), and Construction (3 persons) sectors, the report discloses. Conversely, the daily average job advertisements published in the print media4 increased by 3.4% in 2024, reflecting improved labour demand conditions," the Central Bank stated, the report adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2025. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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