NEW YORK -(Dow Jones)- The liquidity profile of Latin American corporate issuers of debt is "solid," and companies are "better prepared than ever" to face a liquidity crisis, Fitch Ratings said Monday.
Fitch released its report, called "Latin American Corporate Liquidity: Been There, Done That," examining Latin American corporates by country, issuer default rating and sector under the current market uncertainty.
"Tremendous improvements have been made by Latin American corporates in terms of liquidity since 2003," Joe Bormann, a senior director in Fitch's Latin American Corporates Group, said in a press release. "The companies are better prepared than ever to handle a liquidity crisis."
The companies generally show low short-term debt, with an average of 17% of total debt. Cash in relation to short-term debt remains healthy, with 58% of the companies in the study having cash and marketable securities in excess of short- term debt, and 80% of the companies having at least six months of cash, Fitch said.
Latin American corporate issuers enjoyed an "unprecedented" period of global liquidity in 2006 and the first half of this year, allowing many to access regional debt capital markets for the first time, Fitch said.
"However, beginning in July 2007, the tides turned in the liquidity cycle," during the credit crunch, and Latin American companies were affected as companies scaled back the size of their bond issues and pulled deals from the market, the ratings agency said.
Latin American cross-border corporate bond issuance activity fell from $21.3 billion during the first half of 2007 to $931 million in the last quarter.
"The key for the turnaround has been improved sovereign credit profiles in Brazil, Mexico and Chile, as well as strong corporate operating cash flows. Additionally, due to the two major liquidity squeezes they have already weathered in the past decade, most treasurers and (chief financial officers) have come to realize the need to maintain strong balance sheets," Bormann said.
On Monday, Brazil's Safra Leasing Arrendamento Mercantil, an arm of family- controlled Banco Safra, said it plans to issue nonconvertible debentures worth 2 billion reals ($1.1 billion).
Also Monday, Brazil's largest power distributor, Eletropaulo Metropolitana Eletricidade Sao Paulo SA (ELPL5.BR), announced the start of its non-convertible debenture issue worth BRL600 million, with maturity Sept. 15, 2013, and an annual interest rate of 0.90 percentage point over the local interbank rate, called the DI.
Argentina's Banco Macro SA (NYSE:BMA) (BMA) said last week its board had approved a $100 million bond issue due in 2014, part of a $700 million global bond program. The bank also said the offer will run Oct. 19-31, and it will be issued at a price that hasn't yet been fixed.
-By Claudia Assis, Dow Jones Newswires; 201-938-4385; claudia.assis@ dowjones.com
(END) Dow Jones Newswires 10-22-07 1412 Copyright (c) 2007 Dow Jones & Company, Inc.
