Fitch: Latin America Corporate Outlooks Update - Challenges Persist for Chilean Corporates

CHICAGO--()--Chilean corporates face challenging conditions due to weak GDP growth, low commodity prices, and cash flow pressures from corporates with exposure to Brazil, according to Fitch Ratings' Chilean Corporate Outlook Report.

'Credit metrics are expected to remain under pressure; nevertheless, downgrades should be limited in 2016 as most of these credits continue to improve their cost structures', according to Alejandra Fernandez, a Director at Fitch.

Leverage has increased for the majority of the 28 Chilean corporates with international ratings over the past few years. The median adjusted net debt-to-EBITDAR ratio as of June 2015 was 3.9x, a decline when compared with 2.3x in December 2011. Negative operating cash flow trends have been a key driver of higher leverage.

An important contributor to rising debt levels has been debt-funded M&A activity, which has expanded the presence of many corporates in Peru, Colombia and Brazil. Investments in Brazil remain as pressure points for Chilean corporates, with 10 issuers operating in that country.

Positively, foreign exchange risk is largely manageable for the 28 Chilean corporates in aggregate. Derivatives are common and issuers can find instruments that match the terms of the bonds. Issuers have done a reasonable job balancing the currency of their debt versus the currency of their cash flow.

The Chilean special report titled 'Challenges Persist' is available on the Fitch Ratings web site at www.fitchratings.com, or by clicking on the link.

Additional information is available on www.fitchratings.com

2016 Outlook: Chilean Corporates

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874294

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Contacts

Fitch Ratings
Alejandra Fernandez
Director
+56 2 2499 3323
Fitch Chile Clasificadora de Riesgo Ltda.
Alcantara 200 of. 202, Las Condes
Santiago, Chile
or
Rina Jarufe
Senior Director
+56 2 2499 3310
or
Marco Lopez
Analyst
+56 2 2499 3315
or
Media Relations
Alyssa Castelli, +1 (212) 908 0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Alejandra Fernandez
Director
+56 2 2499 3323
Fitch Chile Clasificadora de Riesgo Ltda.
Alcantara 200 of. 202, Las Condes
Santiago, Chile
or
Rina Jarufe
Senior Director
+56 2 2499 3310
or
Marco Lopez
Analyst
+56 2 2499 3315
or
Media Relations
Alyssa Castelli, +1 (212) 908 0540
alyssa.castelli@fitchratings.com