CHICAGO--(BUSINESS WIRE)--Latin American leveraged finance activity is expected to remain resilient despite challenging market conditions. Nevertheless, credit trends are not likely to improve due to sluggish economic growth in the region. Default activity should remain manageable, as most high yield credits maintain reasonable levels of cash relative to upcoming debt maturities.
'We have seen margin compression for Latin America high yield credits due to rising costs and stagnant revenues during the beginning of 2014,' said Joe Bormann, a Managing Director at Fitch. 'The continuation of tepid economic growth in the second half of the year will likely lead to no material improvements in credit protection measures, however, despite a general decline in capex spending by leveraged finance corporates.'
Default activity is not expected to accelerate during the second half of the year. Most credits have manageable liquidity positions. The most vulnerable credits in the region continue to be those in the sugar and ethanol industry in Brazil. During the first half of 2014, three corporate defaults occurred in Latin America - Oceanographia, Sifco and Aralco.
Capital market conditions continue to be challenging for credits in the 'B' rating category during the past 12 months. High yield investors are concerned about the small size of issuances and the lack of liquidity in secondary markets for these bonds.
For more information on these topics and a detailed summary of all Latin America high yield corporate credits, a special report titled 'Latin America Leveraged Finance Stats Quarterly' is available on the Fitch Ratings web site at www.fitchratings.com, or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
Latin America Leveraged Finance Stats Quarterly (First-Quarter 2014)
Applicable Criteria and Related Research: Latin America Leveraged Finance Stats Quarterly
Latin America Leveraged Finance Stats Quarterly (Fourth-Quarter 2013)