The number of listed Brazilian companies at risk of default doubled between last December and May, from 4 to 10, according to Fitch, the risk rating agency.
According to Fitch’s ratings, as of “CCC”, the company already has a substantial credit risk, i.e., with a real possibility of default and a low margin of safety. Below “CCC” comes “CC”, followed by “C”, “RD,” and “D”.
At least ten Brazilian listed companies are rated between “C” and “D”, with the risk of possible imminent default.
The agency did not detail the reason for the sharp increase in Brazilian companies at risk of default, nor did it reveal which companies were downgraded. Among them is the retail giant Americanas, one of the largest companies in the country.
Two days after Americanas’ crisis was revealed due to accusations of accounting maneuvers that caused a 20 billion reais (4 billion dollars) hole in the company, Fitch downgraded Americanas’ rating from “BB”, that is, with high vulnerability to default, to “CC”, in which default “seems somewhat probable”.
Fitch downgraded Americanas again to “C” and finally to “D”, meaning that the company is, in fact, in default after it filed for judicial reorganization.
In February, Electric Light also saw its rating downgraded to the default risk zone when the company announced that it had hired Laplace Finance to improve its capital structure and the tighter credit market due to Americanas’ default.
According to Fitch, the confluence of these events showed the ability of the group to obtain financing to repay its debt. After successive downgrades, the agency rated Light at “D”, following the approval of the company’s request for judicial recovery.
It is worth noting that in December 2022, no Brazilian companies rated “D” by Fitch. Now there are three companies in this situation.
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