Brazil Corporate Liquidity Tight Through 2010: Fitch

Brazilian companies’ liquidity should continue to deteriorate in the next 12 months, Fitch says, though the risks associated with this tight liquidity are becoming more moderate. In a report, the agency explains that a fall in operational cash generation, greater indebtedness, weaker liquidity and limited access to more costly, shorter maturity credit is expected to continue to pressure the payment capacity of various Brazilian companies for at least the next year. Most Brazilian corporates are slowly regaining access to both local and international capital markets and bank credit lines are showing clear signs of recovery, says Fitch. But it expects to see a greater dependency on refinancing sources next year given the larger volume of debt to be amortized, particularly for more cyclical sectors and businesses based on commodities and exports. A sustainable return of credit lines and greater access to the debt market will be an important driver in minimizing greater refinancing risks and consequent pressure for new downgrades, according to the report.