Companies at risk of default more than double in 5 months – 05/30/2023 – Market

From December 2022 until this month of May, the number of publicly traded Brazilian companies more than doubled which have been downgraded to the default risk level by Fitch Ratings.

According to data obtained by Sheetin five months, the number of companies that had their IDP (Issuer Default Rating) downgraded to a level that represents some credit risk rose from four to ten.

According to Fitch’s notes, from “CCC”, the company already has a substantial credit risk, that is, with a real possibility of default and a low margin of safety. Below “CCC” is “CC”, followed by “C”, “RD” and “D”.

The agency did not detail the reason for the abrupt increase in Brazilian companies at risk of default, nor did it reveal the companies that were downgraded. But it is known that Americanas is part of that statistic.

Two days after the crisis that took over the retailer due to the accusation of an accounting maneuver that totaled a BRL 20 billion shortfall in the company, Fitch downgraded Americanas’ rating from “BB”, that is, with high vulnerability to default, to ” CC”, in which default “somehow seems likely”.

Afterwards, Fitch again downgraded Americanas to “C” and, finally, to “D”, which means that the company is in fact in default, after the retailer filed for bankruptcy protection.

Light also had its rating downgraded to the default risk zone in February, when the company announced that it had hired Laplace Finance with the aim of improving its capital structure and the more restrictive credit market due to the default of Americanas.

According to Fitch, the confluence of these events showed a substantial reduction in the group’s capacity to raise financing to amortize its debt. After successive grade downgrades, the agency classified Light as “D”, following the approval of the company’s request for judicial recovery.

It is noteworthy that in December 2022 there was no Brazilian company rated “D” by Fitch. Now there are three companies in this situation.