(Bloomberg) — Fitch Ratings expects corporate credit downgrades to rise this year in Mexico, where more than $20 billion of debt sits just one level above junk.
(Bloomberg) — Fitch Ratings expects corporate credit downgrades to rise this year in Mexico, where more than $20 billion of debt sits just one level above junk.
A weaker global economy and persistently high interest rates at home and abroad will weigh on the outlooks and ratings for Mexican companies, the agency said in a report.
“Negative rating actions in the second half are expected due to a difficult business and credit environment,” analysts led by Alberto Moreno Arnaiz wrote. “Prolonged inflation and higher financing costs are limiting Mexican corporates’ ability to pass through higher costs to final customers, hurting profitability and cash flows.”
The warning of downgrades is particularly alarming for more than a dozen companies that sit at BBB-, the lowest level of investment grade assigned by the ratings agency. Those companies have more than $20 billion of dollar bonds outstanding, according to data compiled by Bloomberg, and a cut to junk by two of the three large credit agencies could cause a sell off as some investors can only hold higher-quality credits.
The list of BBB- rated companies includes the state-owned electricity generator Comision Federal de Electricidad, manufacturers such as Alfa SAB and real estate investment trusts. None of the BBB- companies have a negative ratings outlook.
While Fitch expects debt levels to rise for Mexican companies this year, analysts also said most corporations have healthy cash balances, manageable debt maturity schedules and access to credit through local banks and capital markets. That will help them navigate through the downturn, they wrote.
Fitch recently cut its credit ratings on state oil driller Petroleos Mexicanos, petrochemical maker Braskem-Idesa SAPI and cable provider Total Play Telecomunicaciones.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.