Fitch Ratings announced this week that the US based ratings firm expects that favorable financing conditions and projected GDP growth of 3.5% for 2015 bode well for mergers and acquisitions (M&A) activity in the Colombian corporate sector.
‘Colombia has become a vibrant market for M & A during the past few years,’ according to Jorge Yanes, a Director at Fitch Ratings. ‘Fitch-rated corporates have been at the forefront of this activity, buying companies and assets both in the local market and in the rest of Latin America, and to a lesser extent in the U.S.A. Growing corporate cash flows and a positive business environment have been driving factors in this trend.’
So far, the credit risk profiles of Colombian corporates that have engaged in M&A activity have not weakened to a degree that would necessitate downgrades. Nevertheless, since many companies that have an inorganic growth strategies are reaching the limits of the leverage levels for their rating category, new acquisitions could generate negative rating actions if they are financed mostly with debt or if the target company has a capital structure that is significantly more leveraged.
The full report ‘Colombia Corporates Go Shopping’ is available at ‘www.fitchratings.com‘.
Additional information is available at ‘www.fitchratings.com‘.