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TEXT-Fitch: Latin American corporates with Argentine exposure to face risks
May 30, 2012 / 4:52 PM / 5 years ago

TEXT-Fitch: Latin American corporates with Argentine exposure to face risks

May 30 - The ratings of the vast majority of Latin American corporates with
exposure to Argentine would remain unchanged under most negative scenarios,
according to a new report by Fitch Ratings.	
	
'Argentina continues to be a difficult operating environment due to high
inflation, government intervention, economic uncertainty and limited access to
the debt markets,' said Joe Bormann, a Managing Director in Fitch's Latin
America corporate group. 'The effects of the 2011 elections have heightened risk
and reduced Argentine capital market activity.'	
	
'The median liquidity ratio of the 17 corporates with international ratings
domiciled in Argentine was 2.2x, while the median leverage ratio was 1.6x,'
according to Cecilia Minguillon, a Senior Director at Fitch and co-author of the
report. 'These key credit protection measures are much stronger than that of
their 'B' rated peer group. For the most part, these country-ceiling capped
ratings reflect a high degree of risk associated with operating in Argentina, as
well as exposure to transfer and convertibility risks.'	
	
In addition to the companies domiciled in Argentina, Fitch rates 33 corporates
within Latin America that have a significant presence in Argentina through their
operating subsidiaries. The value of these subsidiaries is viewed to be
substantial - worth at least USD500 million -- for about half of these
companies. As a percentage of EBITDA, however, the operations are relatively
minor. Only seven of the 33 companies generate more than 10% of their
consolidated EBITDA in Argentina.	
	
The electric sector, particularly distribution companies, remains most
vulnerable to a near-term restructuring. Fitch views the probability of
nationalization of resources companies outside oil and gas to be low.	
	
To a degree, all corporates that operate in Argentina run the risk of having
value expropriated by the government due to high inflation and increasing
interventionist policies, which can make it difficult for multinational
companies to repatriate earnings, distribute dividends or otherwise move cash
out of the country.	
	
For more information, the special report titled 'Latin American Corporates with
Exposure to Argentina: No Rest for the Weary' is available on the Fitch Ratings
web site at www.fitchratings.com.	
	
Additional information is available at 'www.fitchratings.com'.	
	
Applicable Criteria and Related Research: Latin American Corporates with
Exposure to Argentina: No Rest for the Weary

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