The Latin American bond market has been closed for most of Q1, 2020 due to heightened uncertainty related to the Coronavirus COVID-19 Pandemic. Fitch Ratings believes this and other factors raise default risk for $2.5 billion USD of $10.9 billion of bonds due for 17 corporates in 2020.
Avianca, Digicel and Odebrecht recently defaulted on debt and have a combined $202 million due in 2020, most of which is debt held by issuers that did not participate in prior restructurings. This debt is not expected to be repaid. Travel restrictions related to the coronavirus will hinder Avianca’s ability to recover, while Digicel will struggle with weak currencies and pressured accounts receivable collections.
On the other hand, refinancing risk is manageable for CFE, ENAP and Codelco due to their ownership by the governments of Mexico and Chile, and they account for $4.9 billion of bonds falling due in 2020.
Refinancing risk is also low for America Movil, CSN, Bimbo, SABESP and SCC. Eight issuers are rated ‘B–’ or lower and account for $2.5 billion of the debt. Argentine issuers IRSA and YPF combined have $821 million of bonds maturing in 2020, with YPF accounting for 90%. Capital controls and market volatility impair Argentine corporates’ capacity to access international capital markets, execute liability management processes and service debt.
Fitch Ratings has published a report titled “Coronavirus Raises Risk On 2020 Latin America Bond Refinancings” that may be accessed by clicking here.