As the international rating agency, "is due to low or negative values of free cash flow, short-term revocable bank credit lines and the dynamics of domestic credit and bond markets, which are also characterized by more short-term nature and have less volume than in developed markets."
In addition, the structure of the debt companies under consideration becomes more short-term because of the greater proportion of debt to banks for the bond debt.
In a special report, "Analysis of liquidity - Europe, Middle East, Africa and Asia-Pacific Region" (Corporate Liquidity Study - EMEA and Asia-Pacific) The Agency shall review about 220 companies with ratings of "BBB" or lower.
"Research shows that 35-40% of the companies from developing markets in Europe, Middle East and Africa have a liquidity ratio below 1 in 2010 and 2011. That demonstrates the difficult situation with liquidity. Projected Fitch, operating cash flows and external sources of cash of these companies will not be sufficient to cover annual debt payments of maturing in 2010 and 2011. without reopening existing revocable credit lines or raising new debt, "- says John Hatton, the representative of the Division of Credit Policy Analysis Unit of Fitch's corporate issuers in Europe and Asia Pacific.
"At the same time smoothing points allocated for certain companies from emerging markets in Europe, Middle East and Africa, with the lowest levels of liquidity in 2010 and 2011. With regard to Russia and Turkey (the forecast on which adversely affects the working assumption that Fitch that the existing short-term recall of credit facilities would not be renewed after expiry), the agency notes that larger companies rated can get at least some advantages in the allocation of bank loans.'s rating of issuers with lower levels of liquidity may also be maintained in case of strong expectations of government financial assistance investment in countries with sovereign ratings and where issuers with more flexible capital investment / capital investment that can be deferred (eg, utilities), have an opportunity to review spending plans in the event of difficulties with liquidity "- the report says.
"In general, some emerging markets such as Russia, the banks under state control had to intervene and provide support to local companies, which in many cases a view to weakening the profitability combined with reduced lending by international banking groups. Domestic financing is usually linked to the higher domestic interest rates, can be expensive and often available on short-term basis ", - said Fitch.
According to the latest report by "Systemic risks in the banking sector", published May 11, 2009, the majority of CIS countries have banking systems, the aggregate levels of financial stability are considered as "weak". Companies in emerging markets are subject to risks associated with the overall quality of local banking systems, which in the event of their problems will have limited availability of credit. Liquidity risk lower for companies with access to global markets (such as large domestic oil companies) that maintain access to long-term foreign funding, believe in the agency.
"The updated projections on the profitability of the companies Fitch came out with only the existing short-term bank credit lines and cash and do not take into account the attraction of new debt. Liquidity Fitch is generally defined as free cash flow before dividends, plus cash in banks, plus the existing stock of funds for revolving credit lines, minus the required future capital expenditures, divided into short-term debt for the relevant period ", - said the report.
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