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250902.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, September 2, 2025, Vol. 26, No. 175 Headlines A R G E N T I N A ARGENTINA: Tries to Stem Bribery Scandal as Bonds & Peso Sink B R A Z I L NEW FORTRESS: Capital World Investors Hold 2.5% Equity Stake C O S T A R I C A BANCO BAC SAN JOSE: Fitch Affirms 'BB+' LT IDR, Outlook Stable E C U A D O R GUAYAQUIL MERCHANT: Fitch Affirms 'BB-' Rating on 2019-1 Notes J A M A I C A KLE GROUP: Incurs Half-Year Loss of $4.3 Million P U E R T O R I C O JAL OUTLET: Seeks Court Approval to Hire Special Counsels LIBERTY COMMUNICATIONS: Fitch Lowers Long-Term IDR to 'CCC' PALMAS ATHLETIC: Seeks to Hire Pico LLC as Special Counsel - - - - - ================= A R G E N T I N A ================= ARGENTINA: Tries to Stem Bribery Scandal as Bonds & Peso Sink ------------------------------------------------------------- Buenos Aires Times reports that President Javier Milei's top officials moved to contain fallout from bribery allegations against an ally that are weighing on Argentina's dollar bonds amid a liquidity crunch that's sent interest rates soaring. Eduardo 'Lule' Menem, a close aide to the president's sister and chief-of-staff Karina, denied any wrongdoing in a corruption scandal that erupted and dominated local media, according to Buenos Aires Times. Economy Minister Luis Caputo, meanwhile, attributed market pricing to high political risk ahead of looming midterm elections, the report notes. Rates will soon go back to levels where "we all would like to see them," he said in a post on X, the report relays. Sovereign bonds fell across the curve, lagging emerging peers, the report discloses. Notes due in 2035 fell by more than 1.6 cent, trading around the lowest in a month, according to data compiled by Bloomberg, the report says. Argentina's official peso weakened nearly 2.5 percent to 1,354.7 per US dollar as of 12.18pm local time, the report relates. "The corruption case looks pretty serious, especially given the electoral backdrop," Pedro Siaba Serrate, an economist with Portfolio Personal Inversiones in Buenos Aires, said by email, the report notes. "At the end of the day, whether it actually shifts voter behaviour is up for debate," he added, but there's no doubt the blow to the currency and sovereign bonds "reflects a significant dose of added uncertainty," he said. The market move isn't being driven just by the scandal's electoral implications, but by "the challenge for the president's image and credibility," said Joaquin Bagues, managing director at local brokerage Grit Capital Group, the report discloses. "It will depend a lot on the government team's resilience and strategy to get through this," he added. The president fired Diego Spagnuolo, director of Argentina's disability agency, ANDIS, after local media published leaked audio messages allegedly discussing bribery in the organisation, which he linked to Menem and Karina Milei, the report relays. Menem issued a statement saying the scandal is the result of a "crude political operation" by former president Cristina Fernandez de Kirchner's left-wing opposition meant to tarnish the government two weeks before elections in Buenos Aires Province, the report notes. The September 7 vote in Argentina's largest province will send a key signal to investors ahead of national midterms in October, in which Milei hopes to increase his libertarian party's standing in Congress, the report says. "No-one has ever mentioned any act of corruption to me, nor have I had any knowledge of anything illegal happening at Andis or any other state agency," Menem said, the report relays. He added that couldn't speak to the authenticity of the audio messages, the report notes. In the recordings, first published, Spagnuolo allegedly says the bribery scheme brings in between US$500,000 and US$800,000 per month, the report discloses. Martin Menem, a libertarian lawmaker who is Lule's cousin and serves as lower house president, also appeared on local television station A24 to deny any corruption in Milei's government, the report relays. Describing the audio messages as of "questionable origin," he said their content is "absolutely false." On the economic and financial fronts, opposition lawmakers threatened the primary budget surplus Milei touts as his crowning achievement by passing various spending measures, the report notes. And the government imposed liquidity provisions aimed at propping up the peso, raising concern among commercial banks, the report discloses. Caputo acknowledged that the resulting spike in borrowing costs risks clouding Argentina's economic outlook, the report relays. But "we believe that this rate hike will be temporary, because the elections will be very favorable" for Milei's libertarians. "There could be some impact on the level of activity in the short term," he added, "but it should recover quickly after the elections." 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 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) -- with an approved immediate disbursement of an equivalent of US$9.65 billion. Argentina's IMF-supported program sought to improve public finances and start to reduce persistent high inflation through a multi-pronged strategy. On April 11, 2025, the IMF further 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. Moody's Ratings on July 17, 2025, upgraded Argentina's long-term foreign currency and local currency issuer ratings to Caa1 from Caa3 and changed the outlook to stable from positive. The upgrade reflects Moody's views that the extensive liberalization of exchange and (to a lesser extent) capital controls, alongside a new International Monetary Fund (IMF) program, support the availability of hard currency liquidity and ease pressure on external finances. This reduces the likelihood of a credit event. In January 2025, Moody's raised Argentina's local currency ceiling to B3 from Caa1 and the foreign currency ceiling to Caa1 from Caa3. Fitch Ratings, on May 12, 2025, upgraded Argentina's Long-Term Foreign-Currency and Local-Currency Issuer Default Rating (IDR) to 'CCC+' from 'CCC'. S&P Global Ratings, in February 2025 lowered its local currency sovereign credit ratings on Argentina to 'SD/SD' from 'CCC/C' and its national scale rating to 'SD' from 'raB+'. DBRS, Inc. upgraded Argentina's Long-Term Foreign and Local Currency Issuer Ratings to B (low) from CCC in November 2024. =========== B R A Z I L =========== NEW FORTRESS: Capital World Investors Hold 2.5% Equity Stake ------------------------------------------------------------ Capital World Investors, disclosed in a Schedule 13G (Amendment No. 5) filed with the U.S. Securities and Exchange Commission that as of June 30, 2025, it beneficially owns 6,806,969 shares of New Fortress Energy Inc.'s common stock. These shares represent 2.5% of the 274,198,296 shares believed to be outstanding. The filing notes that Capital World Investors ("CWI") is a division of Capital Research and Management Company ("CRMC"), as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl, Capital International K.K., Capital Group Private Client Services, Inc., and Capital Group Investment Management Private Limited (together with CRMC, the "investment management entities"). CWI's divisions of each of the investment management entities collectively provide investment management services under the name "Capital World Investors." Capital World Investors may be reached through: Timothy J. Moon Vice President and Senior Counsel Capital Research and Management Company 333 South Hope Street, 55th Floor Los Angeles, CA 90071 Tel: 213-486-9200 A full-text copy of Capital World Investors' SEC report is available at https://tinyurl.com/6x959sen About New Fortress Energy Inc. New Fortress Energy Inc., a Delaware corporation, is a global energy infrastructure company founded to help address energy poverty and accelerate the world's transition to reliable, affordable and clean energy. The Company owns and operates natural gas and liquefied natural gas infrastructure, ships and logistics assets to rapidly deliver turnkey energy solutions to global markets. The Company has liquefaction, regasification and power generation operations in the United States, Jamaica, Brazil and Mexico. The Company has marine operations with vessels operating under time charters and in the spot market globally. * * * In July 2025, S&P Global Ratings lowered its issuer credit rating on New Fortress Energy Inc. (NFE) to 'CCC' from 'B-' . . . The negative outlook reflects heightened refinancing risk on the company's notes due September 2026 and an increased possibility that a payment default or distressed exchange may occur within the next 12 months. =================== C O S T A R I C A =================== BANCO BAC SAN JOSE: Fitch Affirms 'BB+' LT IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Banco BAC San Jose, S.A. 's (BAC San Jose) Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB+' and Local Currency IDR at 'BB+'. The Rating Outlook for the Long-Term IDRs remains Stable. Fitch has also affirmed BAC San Jose's Short-Term Foreign and Local Currency IDRs at 'B', Viability Rating (VR) at 'bb' and Shareholder Support Rating (SSR) at 'bb+'. Key Rating Drivers Shareholder Support Drives IDRs: Banco San Jose' IDRs are driven by the bank's Shareholder Support Rating (SSR), which reflects Fitch's view of parent BAC International Bank, Inc.'s (BIB; BB+/Stable) high propensity and adequate ability to extend support, if needed. BAC San Jose's international ratings and Stable Outlooks mirror those of its shareholder. Core Subsidiary; High Integration: Fitch's assessment of the parent's ability to provide support considers BAC San Jose's key and integral role in BIB's regional diversification strategy. The Costa Rican subsidiary provides core products in a strategically important jurisdiction. Reputational Influence: BIB's subsidiaries in Central America operate under the same brand. Therefore, Fitch's support assessment reflects its view that an unexpected default of BAC San Jose or any of BIB's rated subsidiaries would constitute reputational risk for the parent and could significantly affect its franchise. Favorable Operating Environment: Fitch assesses Costa Rica's banking operating environment at 'bb' with Positive Outlook, in line with the sovereign's Outlook. Costa Rica's robust growth and high per capita income could have a positive effect on the OE. Fitch estimates the country's GDP per capita at USD18.85k for 2025 and an Operational Risk Index of 60% as of July 2025. Positive macroeconomic dynamics, including robust economic growth (2025F: 3.8%, 2026F: 3.5%), recovering investment and rising consumer spending, should allow banks to generate consistent business volume. Strong, Diversified Franchise: BAC San Jose's VR reflects the bank's solid domestic franchise, supported by a robust business model in an improving economic environment. The performance of the retail and corporate franchise has resulted in good pricing power in key segments, as well as access to a large and stable deposit base, leading to better-than-peer revenue diversification. BAC San Jose ranks third among Costa Rican banks in terms of assets and is a market leader in certain business segments. Good Asset Quality Metrics: BAC San Jose demonstrates solid asset quality, supported by prudent underwriting standards and robust risk controls. As of 1S25, the 90-day impaired loans ratio improved to 1.3%, down from 1.6% at YE24. This performance compares favorably with local peers and reflects moderate loan growth, stronger borrower performance, and high collection rates. The bank maintains strong coverage of impaired loans (314.4% as of 1S25) and low concentration levels (the 20 largest debtors represent 1.0x the FCC). Fitch expects asset quality to remain stable over the medium term, supported by conservative lending practices and effective risk management. Fitch views the maintenance of BAC San Jose's consistently strong and stable asset quality metrics as a key strength, which has led to a one-notch upgrade in the Asset Quality and Risk Profile factors. Improvements in Profitability Levels: BAC San Jose has consistently demonstrated strong performance across economic cycles. As of 1S25, operating profit to risk-weighted assets (RWA) reached 3.6%, exceeding its four-year average of 2.7%, supported by a stable net interest margin (NIM) of 7.6% and controlled impairment charges. Fitch anticipates profitability metrics will remain stable in the medium term, underpinned by its diversified revenue streams, moderate growth, a steady NIM, and sound risk management. Recent improvements in profitability metrics are reflected in the revision of this factor's trend to Positive from Stable. Adequate Capital Buffers: BAC San José's capitalization is considered adequate given its business model and its risk exposure. As of the 1S25, the Fitch Core Capital (FCC) to risk-weighted assets (RWA) ratio stood at 13.2% (YE24: 13.5%), reflecting solid capital buffers above regulatory requirements. This is also evidenced by a regulatory capital ratio of 13.3% that remains solid, despite dividend distributions. Capitalization metrics are further supported by a strong reserve coverage ratio and benefit from the ordinary support that could be provided by BIB if needed. Fitch expects capitalization metrics to remain relatively stable, supported by the bank's moderate growth appetite. Stable Funding and Liquidity: BAC San Jose's funding benefits from a strong deposit franchise, supported by a stable and granular deposit base, which accounted for 95.2% of the bank's total financing as of the 1S25. Its diversified funding profile is further strengthened by solid access to both local and international markets. The gross loans-to-deposits ratio remains solid at 85.1% as of 1S25 (YE24: 83.8). Liquidity remains adequate to cover upcoming maturities, as reflected in sound regulatory ratios. Liquid assets (cash and securities) covered approximately 33.1% of deposits. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Negative changes in BAC San Jose's IDRs and SSR would result from a negative rating action of more than one notch on Costa Rica's sovereign and country ceiling ratings. - Any relevant reduction in BIB's propensity of support may trigger a downgrade of BAC San Jose's IDRs and SSR. Additionally, a downgrade of BIB's IDRs could lead to a similar action on BAC San Jose's ratings. - BAC San Jose's VR could be downgraded in the case of a material deterioration of the bank's financial performance resulting from a material asset-quality deterioration that significantly erodes its profitability and drops its FCC to RWA consistently below 9%. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - BAC San Jose's IDRs and SSRs could be upgraded one notch following a similar action on BIB's IDRs. - The VR could be upgraded if the bank consistently maintains a very strong financial profile, while improving Fitch's OE assessment. VR ADJUSTMENTS The Viability Rating has been assigned below the implied Viability Rating. Operating Environment/ Sovereign Rating Constraint was identified as a relevant negative factor in the assessment. The OE score of 'bb' has been assigned below the 'bbb' category implied score due to the following adjustment reason: sovereign rating (negative). Summary of Financial Adjustments Fitch reclassified pre-paid expenses and other deferred assets as intangibles and deducted from total equity, to reflect its low absorption capacity. For BAC San Jose, the impact of this deduction is not considered material, as these items represented only 1.1% of total equity as reported in June 2025. Public Ratings with Credit Linkage to other ratings BAC San Jose's IDRs are driven by the potential support it could receive from its parent, BAC International Bank, Inc, if required. 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 ----------- ------ ----- Banco BAC San Jose, S.A. LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B LC LT IDR BB+ Affirmed BB+ LC ST IDR B Affirmed B Viability bb Affirmed bb Shareholder Support bb+ Affirmed bb+ ============= E C U A D O R ============= GUAYAQUIL MERCHANT: Fitch Affirms 'BB-' Rating on 2019-1 Notes -------------------------------------------------------------- Fitch Ratings has affirmed the issue-specific ratings assigned to all outstanding series of notes issued by Guayaquil Merchant Voucher Receivables Limited and Guayaquil DPR Limited at 'BB-'. The Rating Outlook on the notes is Stable. Entity/Debt Rating Prior ----------- ------ ----- Guayaquil Merchant Voucher Receivables Limited 2019-1 401539AA9 LT BB- Affirmed BB- Guayaquil DPR Limited 2023-1 401536AA5 LT BB- Affirmed BB- 2023-2 401536AC1 LT BB- Affirmed BB- 2024-1 401536AE7 LT BB- Affirmed BB- 2024-2 LT BB- Affirmed BB- Transaction Summary Guayaquil DPR Limited is backed by existing and future USD diversified payment rights (DPRs) originated by Banco Guayaquil, S.A. (BG) in Ecuador. The majority of DPRs are processed by designated depository banks (DDBs) that have executed account agreements (AAs), irrevocably obligating them to make payments to an account controlled by the program agent. Guayaquil Merchant Voucher Receivables Limited is backed by future flows due from American Express (Amex), Visa International Service Association (Visa), and MasterCard International Incorporated (MasterCard) related to international merchant vouchers (MVs) acquired by Banco Guayaquil, S.A. in Ecuador. Fitch's ratings address timely payment of interest and principal on a quarterly basis. KEY RATING DRIVERS Future Flow (FF) Ratings Driven by Originator's Credit Quality: The ratings of these FF transactions are driven by the Long-Term (LT) Issuer Default Rating (IDR) of the originator, BG. On Oct. 31, 2024, Fitch affirmed BG's LT IDR at 'CCC+' and Viability Rating (VR) at 'ccc+'. BG's IDR is underpinned by its VR which is highly influenced by Ecuador's sovereign rating and broader operating environment (OE) considerations. The bank's ratings are capped by Fitch's assessment of the OE score of 'ccc+'. GCA Supports Notching Differential: Fitch uses a going concern assessment (GCA) score to gauge the likelihood that the originator of an FF transaction will stay in operation throughout the transaction's life. Fitch assigned a GCA score of 'GC2' to BG based on the bank's systemic importance. The score allows for a maximum of four notches above the Long-Term IDR of the originator. Notching Uplift from IDR: Considering the bank's current LT IDR, the assigned ratings are at the maximum notching differential of four notches allowed by Fitch's FF methodology for an originator with a score of 'GC2'. Fitch reserves the maximum notching uplift for transactions with originators rated on the lower end of the rating scale, such as BG. Moderate Future Flow Debt: Future flow represents 4.6% of BG's total funding and 28.3% of BG's non-deposit funding when utilizing nonconsolidated financials as of March 2025 and considering the outstanding balances on the notes issued out of BG's merchant voucher and DPR programs as of July 2025. Fitch views the ratio of FF debt to overall liabilities as small enough to allow the financial FF ratings the maximum uplift indicated by the GCA score. Coverage Levels — DPR Program: Fitch views the transaction's debt service coverage ratio (DSCR) as more than sufficient for the assigned rating. The minimum projected DSCR is approximately 48.6x when considering the maximum periodic debt service over the life of the program and DDB flows over the past five years, while excluding what could be considered nonrecurring DPR flows. Coverage Levels — MV Program: Coverage levels have remained more than sufficient to cover quarterly debt service payments and remain commensurate with the rating on the outstanding notes. When considering average rolling quarterly flows over the past five years and the maximum periodic debt service over the life of the program, Fitch's projected minimum quarterly debt service coverage ratio is 5.7x throughout the life of the program. De-dollarization Risk: While the dollarization regime anchors macroeconomic stability, the risk of de-dollarization exists. It would only occur in an extreme scenario but would be a major shock to the Ecuadorean system. Sovereign/Diversion Risks Reduced: The structure mitigates certain sovereign risks by collecting cash flows offshore until investors are paid. Fitch believes diversion risk is partially mitigated by notice, consent and agreements signed by AmEx, Visa, and MasterCard (in the case of the MV program) and AAs signed by the DDBs (in the case of the DPR program). RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The transactions' ratings are sensitive to changes in BG's credit quality. Currently, the MV and DPR transactions are receiving the maximum notching uplift from BG's LT IDR. Therefore, a deterioration in BG's credit quality by one notch would trigger a downgrade of the ratings of the transactions from their current level; - The transactions' ratings are sensitive to increases in the FF debt relative to the bank's funding ratios. If either of the ratios increase beyond the thresholds outlined in Fitch's "Future Flow Securitization Rating Criteria," it could result in a downgrade of the ratings of the transactions from their current level; - The transactions' ratings are sensitive to the credit card acquiring business DPR business lines' performances and ability to continue operating, as reflected by the bank's GCA score. Changes in Fitch's view of the bank's GCA score could lead to a change in the transactions' ratings. In addition, the merchant voucher program could be sensitive to significant changes in the credit quality of American Express, Visa, or MasterCard to a lesser extent. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - The main constraint to the transactions' ratings is the originator's rating and BG's operating environment. If the bank's LT IDR is upgraded by more than one notch from its current rating, Fitch would consider an upgrade to the ratings of the transactions from their current level. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The future flow ratings are driven by the credit risk of Banco Guayaquil, S.A. as measured by its Long-Term IDR. 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. ============= J A M A I C A ============= KLE GROUP: Incurs Half-Year Loss of $4.3 Million ------------------------------------------------ RJR News reports that KLE Group Limited is reporting a total comprehensive loss of $4.3 million (2 cents per share) on operating income of $9.4 million during the first six months of this year. This was an improvement, however, compared with the total comprehensive loss of $12.4 million (12 cents per share) recorded during the corresponding period last year, according to RJR News. The group's current assets also jumped to $52.6 million for the first six months of this year, compared with $35.7 million for the comparative period in 2024, the report notes. KLE Group Limited engages in the real estate and property management activities in Jamaica. ===================== P U E R T O R I C O ===================== JAL OUTLET: Seeks Court Approval to Hire Special Counsels --------------------------------------------------------- JAL Outlet, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ legal professionals Jose Rafael Ramirez Ramos, Jose Francisco Ramirez Ramos and Jose Felix Ramirez Ramos as special counsels. The Debtor needs the attorneys' legal assistance in connection with a case (Case No. K EF2005-0301) filed in the Court of First Instance of Puerto Rico, Superior Section of San Juan, titled Autoridad de Carreteras y Transportacion de Puerto Rico v. Jose Arturo Lugo et als. The professionals will be paid 33 percent of the compensation to be received by Debtor, damages, fines, penalties and the costs of construction of improvements, and as to the claim by Centro de Recaudacion de Ingresos Municipales regarding said properties due to the effects of the construction of the ramp by the Authority. As disclosed in a court filing, the lawyers are "disinterested persons" as the term is defined in Section 101(14) of the Bankruptcy Code. They can be reached at: Jose Rafael Ramirez Ramos, Esq. Jose Francisco Ramirez Ramos, Esq. Jose Felix Ramirez Ramos, Esq. P.O. Box 720 Mayaguez, Puerto Rico 00681-0720 Tel: (787)-834-9200 About JAL Outlet, Inc. JAL Outlet, Inc. is a wholesale distributor of motor vehicles and automotive parts operating out of Hormigueros, Puerto Rico. The Company supplies products such as vehicle components, accessories, and related equipment to retailers and service providers. JAL Outlet, Inc. in Hormigueros, PR, sought relief under Chapter 11 of the Bankruptcy Code filed its voluntary petition for Chapter 11 protection (Bankr. D.P.R. Case No. 25-02796) on June 23, 2025, listing $10 million to $50 million in assets and $1 million to $10 million in liabilities. Jose A. Lugo Alverio as president, signed the petition. Judge Maria De Los Angeles Gonzalez oversees the case. CHARLES A. CUPRILL, PSC LAW OFFICES serve as the Debtor's legal counsel. LIBERTY COMMUNICATIONS: Fitch Lowers Long-Term IDR to 'CCC' ----------------------------------------------------------- Fitch Ratings downgraded Liberty Communications of Puerto Rico LLC's (LCPR) Long-Term Issuer Default Rating (IDR) to 'CCC' from 'B'. Fitch also downgraded the ratings on LCPR's RCF, LCPR Loan Financing LLC's 2028 term loan and LCPR Senior Secured Financing Designated Activity Company's 2027 and 2029 senior secured notes to 'CCC+' with a Recovery Rating of 'RR3', from 'B+'/'RR3'. The downgrade follows 2H25 results that showed slower-than-expected recovery, LCPR's announcement of liability management plans to address its unsustainable capital structure, and its proposed separation from Liberty Latin America (LLA). Fitch's action reflects high leverage, tight liquidity, and the potential for a distressed debt exchange transaction as maturities approach in 2027. The intention to separate removes prior expectations of shareholder financial support or reinvestment of related-party fee payments before the next refinancing. LCPR is now expected to fund its liquidity needs with its own assets. Key Rating Drivers Upcoming Liability Management: Fitch believes LCPR may pursue a distressed debt exchange type of transaction to lower its debt quantum and the current high leverage, driven by slower-than-expected operational recovery. The current rating reflects uncertainty about the timing and actions that may occur. LLA has hired Moelis and Ropes & Gray as advisors and announced intentions to separate or spin off LCPR, signaling reduced parental support for the subsidiary. Aggressive Capital Structure: Fitch believes LCPR's aggressive capital structure is unsustainable and must be addressed before the revolver and USD1.2 billion secured notes mature in March and October 2027. Fitch projects the net debt/EBITDA will remain high, at about 8.0x by 2026, down from a peak of about 10.7x in 2024. This reduction reflects expected improvement EBITDA growth in 2025 and 2026, driven by lower costs, higher ARPU, and improved revenue as postpaid subscriber losses normalizes in the period after the migration. Expected Negative FCF: Fitch expects LCPR to generate negative FCF over the next two years, factoring in payments for EchoStar's spectrum assets of USD72 million, USD45 million, and USD 40 million due on Sept. 3, of 2025, 2026, and 2027. As a result, financial flexibility remains limited without new external financing. The company currently relies on its USD172.5 million revolving credit facility (USD57 million drawn as of 2Q25). The maintenance covenant is tested at quarter end only if one-third or more of the RCF is drawn. Fierce Competition: Competition in the Puerto Rico telecommunications market will remain intense in the coming years. LCPRH, a leader in broadband and pay-tv, ranks third in the mobile segment. In 1Q25, its fixed, mobile, and B2B segments contributed 41%, 42%, and 14%, respectively, of consolidated revenue. T-Mobile US, Inc. (BBB+/Stable) leads the mobile segment but lacks significant broadband or fixed-line presence. Claro, a unit of América Móvil S.A.B. de C.V. (A-/Stable), ranks second in both broadband and mobile, focusing on pre-paid subscribers, while LCPR serves mostly post-paid customers. Standalone Credit Profile: The downgrade reflects the proposed separation of the company from LLA—including a possible spin-off—which, in Fitch's view, signals reduced potential financial support compared to prior expectations. Fitch expects the company to fund its liquidity needs with its own assets going forward. LCPRH is an independent, ring-fenced structure with no cross-guarantees or cross-default clauses with LLA. Peer Analysis LCPRH has higher leverage and is smaller with less geographic diversification than its sister company, Cable & Wireless Communications Limited (CWA, BB-/Stable). The LLA group's business profile resembles Luxembourg's Millicom International Cellular S.A. (BB+/Stable), a holding company with subsidiaries in leading market positions. LLA generates more revenue in U.S. dollars and from subscriptions, while Millicom's revenue is mainly denominated in local currencies. Leverage for both companies has increased due to acquisitions, but LLA's leverage remains higher than Millicom's. Fitch expects Millicom's leverage to fall below 2.5x in 2025. LCPR's business profile and diversified service offerings in Puerto Rico are similar to Millicom's subsidiary, Telecomunicaciones Digitales, S.A. (BB+/Stable) in Panama (BB+/Stable). Key Assumptions - Fixed Revenue Generating Units closer to one million in 2025-2026; - Slight increase in blended fixed average monthly revenues per user (ARPU); - Mobile subscribers' base of 700,000 in 2025 and 720,000 in 2026; - Slight increase in Mobile ARPU due to less promotional activity; - Annual capex of about USD220 million in 2025 and 2026, including spectrum payments. Recovery Analysis For entities rated 'B+' and below (where default is closer and recovery prospects are more meaningful to investors), Fitch undertakes a tailored, or bespoke, analysis of recovery upon default for each issuance. The resulting debt instrument rating includes a Recovery Rating (from 'RR1' to 'RR6') and is notched from the IDR accordingly. In this analysis, there are three steps: (i) estimating the distressed enterprise value (EV); (ii) estimating creditor claims; and (iii) distribution of value. Fitch assumed Liberty would emerge from a default scenario as a going concern rather than liquidated. Fitch assumes a Going Concern (GC) EBITDA of approximately USD330 million, reflecting post-integration and a distressed EV multiple of 5.5x multiple reflecting the company's performance and market position in the mobile and fixed telephony segments in Puerto Rico. These assumptions result in a Recovery Rating of 'RR3' for the secured instrument, which is a one-notch uplift from the 'CCC' IDR. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Further deterioration of operational and financial indicators; - Announcement of a Distress Debt Exchange (DDE) or any type of debt restructuring. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Fitch does not anticipate an upgrade in the near term due to the company's elevated leverage; - Medium-term, positive actions are possible if net debt/EBITDA are sustained below 6.0x at LCPRH; - EBITDA/ Interest coverage above 1.5x; - Positive (CFO-Capex)/Debt ratio; - Progress in debt refinancing. Liquidity and Debt Structure Fitch expects LCPR's liquidity to remain pressured until it addresses its short-term debt maturity of USD85 million, the USD72 million spectrum payment, and the USD1.2 billion senior secured bond due in October 2027. This outlook reflects the reduced cash position of USD22 million in June 2025 and Fitch-projected negative FCF over the next three years. Fitch believes LCPR will need to raise other sources of liquidity from up to one third of the USD172.5 million revolving credit facility, which can be drawn before the springing covenant is triggered at quarter end. Issuer Profile LCPR is controlled by Liberty Latin America and offers mobile, pay-TV, broadband, and fixed telephony services to residential customers, as well as medium and large businesses in Puerto Rico and the U.S. Virgin Islands. 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 Liberty Communications of Puerto Rico LLC has an ESG Relevance Score of '4' for Exposure to Environmental Impacts due to its operations in a hurricane-prone region, 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 Recovery Prior ----------- ------ -------- ----- LCPR Senior Secured Financing Designated Activity Company senior secured LT CCC+ Downgrade RR3 B+ Liberty Communications of Puerto Rico LLC LT IDR CCC Downgrade B senior secured LT CCC+ Downgrade RR3 B+ LCPR Loan Financing LLC senior secured LT CCC+ Downgrade RR3 B+ PALMAS ATHLETIC: Seeks to Hire Pico LLC as Special Counsel ---------------------------------------------------------- Palmas Athletic Club Corp. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Pico LLC as special counsel. Since January 14, 2021 Pico LLC was reengaged to assist the Debtor in its negotiations formerly with the Tourism Development Fund, UBS Trust Company and others concerning certain debts assumed by Debtor and secured by Debtor's assets, including efforts to cancel such debts through the repurchase of AFICA bonds issued to finance the construction or refurbishment of Debtor's acquired assets and in the design and implementation of measures to facilitate such efforts and to secure continuity of availability of current Debtor's assets for use by its members. Pico LLC will continue to represent the Debtor in these matters. The firm's current hourly rates are: Attorneys $175 to $325 Paralegal $110 Guillermo Pico, Esq. attests that he and his law firm are disinterested persons, as that term is defined in the Bankruptcy Code, and do not hold or represent an interest adverse to the estate with respect to the matter on which they are proposed to be employed. The counsel can be reached through: Guillermo R. Pico, Esq. PICO LLC 1150 Ponce De Leon Avenue, 4th Floor San Juan, PR 00909 Tel: (787) 999-9001 E-mail: firm@picoadvisors.com About Palmas Athletic Club Corp. Palmas Athletic Club Corp. owns and operates a 420-acre recreational property within Palmas Del Mar Resort in Humacao, Puerto Rico. The site includes two 18-hole golf courses, a 22,200-square-foot clubhouse, a 5,600-square-foot beach clubhouse, and related facilities. Palmas Athletic Club Corp. sought relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case No. 25-03489) on August 4, 2025. In its petition, the Debtor reports total assets of $16,793,944 and total liabilities of $36,514,983. The Debtor tapped Charles A. Cuprill Hernandez, Esq. at Charles A. Cuprill, PSC, Law Offices and CPA Luis R. Carrasquillo & CO, PSC as financial consultant. ********* 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. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. 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