Thursday, 18 December 2008

Bertin Ratings May be Cut by Moody's; Weak Exports, Rising Costs Seen Hampering Profits, Debt Metrics

Yesterday, Moody's analysts Soummo Mukherjee and Alex Carpenter said in a note that Bracol Holdings (the owner of Bertin, the Brazilian meat packer) may be downgraded. The rating agency changed its outlook on the Ba3 rating (junk) to negative from stable. 

The analysts said that the decision reflects Moody's view that operating margins may narrow and debt metrics may worsen as a consequence of high cattle prices (which pushes costs higher), and the potential global recession that will hinder exports in key markets. 

The move indicates that rating agencies will be quicker this year and next to change their ratings on Latin American companies. During last year and most of 2008, rating agencies awarded more upgrades than downgrades to Latin companies, and in general their comments at the start of the crisis tended to be bullish (that the region was entering this crisis in better shape, with better fundamentals, etc.) They have slowly been changing their opinions. It wouldn't be surprising if some change in Petrobras ratings is underway. Anyways, most analysts remain bullish on Latin corporate debt -- the Brazilian government for instance is preparing emergency credit lines for companies with debt denominated in foreign currency to refinance or make payments along 2009. Repayment risks are limited; perhaps the issue that deserves more attention is the way management will deal with the crisis (whether they will scrap expansion, freeze purchases, close idle plants and fire staff.) That will be key for future prices for regional corporate debt. 

No comments:

Post a Comment