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Mexico's corporate liquidity risk 'mostly low' despite policy uncertainties

Publication Date: 10 May 2019 - By ReachX Team By ReachX T.

Environmental, Social & Governance Macro Multi Asset Latin America


Most Mexican non-financial companies have low or medium liquidity risk and will be able to cover their short-term debt and maturities of their long-term debt, operating expenses and regular capital spending through 2020, according to a leading rating agency. 

In a note to its clients, Moody’s said while foreign-exchange risk remains low among Mexican companies, weakening economic growth will weigh on near-term fiscal prospects. 

"About 85% of the 27 Mexican Moody’s rated non-financial companies rated B3 and above have medium or low liquidity risk today," said Alonso Sanchez, Vice President at the agency. 

"In general, these companies can cover their short-term debt and maturities, operating expenses and regular capital spending through 2020 using cash on hand, free cash flow and available committed credit facilities."

Corporate liquidity practices in Mexico generally still lag behind global norms with some companies lacking explicit policies for addressing about liquidity risk. Furthermore, several companies lack committed credit facilities and depend on banks or market access, which increases their refinancing risk. 

Companies with high liquidity risk such as PEMEX, SixSigma Networks Mexico (KIO), and Infraestructura Energética Nova have limited cash to address upcoming maturities, sizable negative free cash flow or a lack of committed credit facilities, Moody’s noted.

Most Mexican companies face at least some foreign-exchange risk but overall the risk is low. From the companies reviewed by Moody’s, all companies have foreign-currency exposure fully offset by earnings in foreign currency or other factors. 

“In an event of a sudden peso devaluation a 15% depreciation of the peso would leave Mexican corporates with cushion for complying with its maintenance leverage covenants,” the agency concluded.


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This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX T.


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