Tighter Credit Seen Hitting LatAm Equity

While LatAm has been relatively insulated from the credit crisis, given a generally low exposure to US imports, tightening credit is likely to affect a number of companies, according to Citi. The shop runs several screens evaluating corporate balance sheets, debt maturities and free cashflow to arrive at a list of names that, from a technical point of view, are more exposed to worsening credit conditions. Companies like Lojas Americanas, B2W, Unipar, Lupatech and LAN Airlines have net debt to total capital ratios of 86%-56%, and between a third to half of that debt in the bond markets. Companies with the lowest interest coverage ratios in the region include Ecodiesel, Cosan, Vivo, Sadia and Unipar, with ratios of 0.5-1.6. And among those with the largest amount of debt maturing in the next two years given their free cash flow situations are Cosan, ICA, Brascan, PDG and BR Malls, all with FCF/ maturing debt ratios of minus 11.1 to minus 6.2, says Citi.