Latin American corporate credit indicators point toward varying leverage trends across the region, with the majority of countries experiencing stabilizing and decreasing leverage, according to a series of new Fitch Ratings reports.
“Following a heavy election cycle in 2018, corporates across the region are benefiting from greater clarity in the trajectory of their respective economies,” said Jay Djemal, Director. “Corporate leverage in Argentina has increased due to peso depreciation, while Brazilian, Colombian and Peruvian companies see an ongoing deleveraging trend. Chile’s corporate leverage ratios have stabilized, while Mexican corporates exhibit among the lowest leverage in the region but could be challenged by potential economic deterioration.”
In Argentina, the peso’s rapid decline pushed corporate leverage up to a median debt/EBITDA ratio of 4.1x and net debt/EBITDA to 3.6x, as of December 2018, despite improved FCF generation. Brazilian corporates’ average median net leverage is expected to decline to 2.5x in 2018 and 2019 from 2.7x in 2017, 2.9x in 2016 and 3.1x in 2015. Most Brazilian issuers are prepared for some volatility in exchange rates.
The median adjusted debt/EBITDAR and adjusted net debt/EBITDAR for Chilean issuers should remain around 4.0x and 3.8x, respectively. Forecast median FCF generation is expected to remain relatively neutral.
Positive FCF remained stable for Colombian corporate issuers and favored a declining leverage trend as median adjusted debt/EBITDAR and adjusted net debt/EBITDAR were 2.6x and 2.4x for the last 12 months ended Sept. 30, 2018, respectively.
Mexico’s corporate leverage stabilized and remains among the lowest in Latin America. Median total adjusted debt/EBITDAR and net debt/EBITDAR were 3.2x and 2.6x, respectively, for the last 12 months ended Sept. 30, 2018, similar to year-end 2017 figures.
Peruvian corporates issued approximately USD1.9 billion through first-half 2018, due to first-time issuers Peru LNG, InRetail Pharma and Hunt Oil Company of Peru whereas no debt issuance has occurred to date in 2019. Hunt was the last of these companies to issue, pricing at the end of May before a marked slowdown in regional bond activity.