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EMEA corporate liquidity staying strong in 2019

Publication Date: 17 Jun 2019 - By ReachX Team By ReachX Team
Actionable
Differentiated

Thematic Accounting Equity Fundamental Multi Asset UK MENA EU ex-UK

Overall liquidity of EMEA [Europe, Middle East and Africa] non-financial companies remains "very solid" with some pockets of stress among retail and high-yield companies, according to a leading rating agency.

In its 14th annual EMEA liquidity study, Moody’s noted that around 95% of companies have enough liquidity to meet debt maturities and other cash requirements over a 12-month period without access to new funding, compared with 96% in its 2018 study. 

The current figure is the same for both advanced and emerging market corporate liquidity strength.

"Company-specific factors, such as online competition in retail, are the main reason for the slight overall deterioration in liquidity strength," said Richard Morawetz, Vice President and Senior Credit Officer in the Corporate Finance Group at Moody’s, and author of the report.

Additionally, Brexit uncertainty appears to have had no discernible impact on the liquidity of rated UK corporates with current liquidity indicators broadly similar to those at the time of the 2016 referendum.

Moody’s analysis of speculative grade documentation shows that financial covenants remain loose. While this trend can delay the ability of lenders to take action when a company is nearing distress, it can alleviate near-term liquidity stress from a potential covenant breach.

Total debt for EMEA companies totalled $4.6trn versus $4.8trn last year. Utilities, autos, energy and telecoms account for about half of the total debt, Moody’s said, reflecting the number and scale of firms in those sectors.

 

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