Fitch: Chilean Corporates Supported by Local Liquidity; Falling Commodity Prices Impacts

CHICAGO & SANTIAGO, Chile--(BUSINESS WIRE)--Chilean corporates have responded to the credit crisis by accelerating refinancing activities and increasing liquidity as several companies have started the process of registering new bond lines and commercial paper programs. The Chilean bond market's size is US$50 billion and liquidity in the market is provided by the local pension funds.

'The Chilean debt markets remain open for business,' said Rina Jarufe a Senior Director at Fitch. 'Despite the very challenging conditions, deals are getting done amid the tight global liquidity, albeit at higher spreads. Case in point is the Angamos US$1.0 billion project financing that was closed during the height of the credit crisis.' For the first nine months of 2008, non-financial corporates issued about US$1.9 billion of bonds versus US$1.5 billion in the prior period. The secondary trading of Chilean corporates is quite volatile currently and is fluctuating for top corporates at about 170 to 180 basis points.

'The sectors that will be most vulnerable to current market conditions are those most sensitive to a weaker macroeconomic environment, such as construction and retail,' said Joe Bormann, Managing Director at Fitch. 'In addition, Fitch expects margins to decline in retailers that have large credit card programs due to higher write-offs. Positively, the retail companies have flexibility to reduce capital expenditures, which should reduce some pressure on cash flow.'

While the drop in commodity prices will hurt the profitability of companies in mining and forestry, the majority of companies in these sectors should be able to maintain their ratings during 2008 and 2009 due to steps they took to deleverage during the peak in their commodity cycle. The beverage companies also are generating strong cash flow and have manageable capital expenditure programs, which should enable them to maintain credit profiles consistent with their rating categories.

For more information of the liquidity of the Chilean Corporates please see Fitch's recently issued Special Report entitled: 'Latin American Corporate Liquidity: Waiting for Springtime', which can now be found on Fitch's website at www.fitchratings.com.

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