Latin American Corporate Liquidity: Waiting for Springtime
Fitch Ratings discusses the corporate credit environment throughout Latin America.
Monday, November 10, 2008
As can be seen in the charts on the following two pages, Latin American corporates have made tremendous improvements in their liquidity positions since the end of 2003 due to vibrant local capital markets, strong cash flow generation and significant deleveraging. The improvements have been broad-based, occurring within each market and across each issuer default rating (IDR) category. The charts also reveal a sharp downturn in the funds from operations (FFO) growth rate during the last twelve months (LTM) ended June 30, 2008, and a reduction in cash as a percentage of short-term debt.
Bank credit tightening makes it necessary to look for alternate private capital financing sources.
The average interest rate charged by banks to corporate customers has fallen more than 10% over the last 2 years.
In recent months the banking system has reduced interest rates on loans to large corporations.
The drop from 20% to 6% in the annual growth rate of bank lending to companies as of June, illustrates the direct link between confidence in the future and demand for business loans.
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