Defaults Seen Fewer Than in Past Crisis

If hostile fundraising conditions persist for LatAm corporates, investor focus will shift to bargains in distressed and defaulting credits. Even if the crisis is severe, however, there may be fewer casualties than at the start of the decade when Argentina went bust, or during the Tequila Crisis. Aaron Holsberg, head of LatAm corporate research at ABN AMRO, notes that the issuer base is much stronger than in past crises, having taken advantage of better times last year to refinance or issue equity. “I expect fewer defaults than in the past,” Holsberg told an EMTA panel in New York this week. “I’d be surprised if this crisis reaches the levels of 2001-2002.” Issuers who can successfully scale back capex and have not used lots of leverage for M&A will fare best, adds Katherine Renfrew, who manages more than $4.5bn in EM debt at TIAA-CREF. She notes that high-grade stalwarts like Vale and CSN have survived shock after shock. Those most at risk, says Jim Harper, director of corporate research at BCP Securities, have large looming maturities coupled with low cash balances – such as Brazil’s Bertin and Mexico’s Industrias Unidas.