Fitch Ratings sees positive shift in L. American corporate ratings

Fitch Ratings indicates a positive shift in Latin American corporate ratings for the third quarter of 2024, as upgrades outnumbered downgrades for the first time since Q3 ’23. The downgrade-to-upgrade ratio improved to 0.8x in Q3 24, down from 2.0x in Q2, with nine upgrades compared to seven downgrades.

Downgrades were primarily concentrated in the industrial sector and among high-yield issuers, largely due to bankruptcy filings and weakened financial profiles. In contrast, upgrades were nearly evenly distributed between high-yield and investment-grade issuers, driven by improvements in financial metrics and merger and acquisition activity.

The outlook for Latin American corporates remains stable, with 81 per cent rated Stable, 12 per cent Negative, and 7 per cent Positive, consistent with the previous quarter. Moreover, Fitch forecasts an improvement in credit metrics for rated issuers in 2025, projecting a slight decline in the total debt-to-EBITDA ratio from 2.7x in 2023 to 2.5x and an increase in interest coverage from 4.8x to 5.3x.

This improvement is expected to be supported by mid-single-digit revenue growth and modest margin expansion.

Attribution: Fitch Ratings

Subediting: M. S. Salama