Experiencias Exitosas Recientes de Emisores La Ti No America Nos

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Experiencias exitosas recientes de EmisoresLatinoamericanos

¿Qué ventanas de oportunidad existen?

Daniel Kastholm, CFA

Managing Director

Fitch Ratings Mexico Conference

Mexico City

November 27th, 2007



Issuance Trends and Implications

Liquidity and the Impact on Latin America Corporate Credit

Increasing Shift from Systemic to Idiosyncratic Risk

Latin America Corporate High Yield Dominates



November 27th, 2007www.fitchratings.com 2

Emerging Markets Boosted by Positive Trends

Average Rating by EM Region

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

Latin America

Emerging Asia

Emerging Europe

A–

BBB+

BB–

BBB

BBB–

BB

BB+

B+

Source: Fitch Ratings

> Solid Economic Growth

> High commodity prices

> Increasing domestic demand

> Decreasing debt burdens

> Lower funding requirements

> Strong international reserves




Emerging Markets and the Credit Crunch …

EMBI+ Credit Spread

125

145

165

185

205

225

245

265

0 2 - A p r - 0 7

1 7 - A p r - 0 7

0 2 - M a y - 0 7

1 7 - M a y - 0 7

0 1 - J u n - 0 7

1 6 - J u n - 0 7

0 1 - J u l - 0 7

1 6 - J u l - 0 7

3 1 - J u l - 0 7

1 5 - A u

g - 0 7

3 0 - A u

g - 0 7

1 4 - S e

p - 0 7

2 9 - S e

p - 0 7

1 4 - O

c t - 0 7

2 9 - O

c t - 0 7

1 3 - N o v - 0 7

Source: JPM




Emerging Markets and the Credit Crunch …

EMBI+ Credit Spread

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1995 1998 2001 2004 2007

Tequila CrisisAsia and

Russia Crises

Argentina Default

Brazil Crisis

Source: JPM

Sub-PrimeCrisis




Latam Cross Border Issuances - Coming Back to Life ???

Issuer Date Amount Coupon Average Life Fitch S&P Mdy'sCap Cana (Dominican Republic) Nov-07 500$ Pending 8.5 B- - B3

San Luis (Mexico) Nov-07 275$ Pending 10 B - B2

Unialco (Brazil) Nov-07 150$ Pending 10 - B B2

Trump Ocean Club (Panama) Nov-07 220$ 10.75% 5.5 BB - Ba3

Petrobras (Brazil) Nov-07 1,000$ 6.06% 10 BBB- BBB- Baa1

EEB (Colombia) Oct-07 610$ 8.75% 7 BB BB -Gerdau (Brazil) Oct-07 1,000$ 7.25% 10 BBB- BBB- -

Durango SA de CV (Mexico) Oct-07 520$ 10.50% 8 B+ B+ -

Edenor (Argentina) Oct-07 200$ 10.50% 10 - B- B2

IMPSA (Argentina) Oct-07 225$ 11.25% 7 B - -

Odebrecht (Brazil) Oct-07 200$ 7.50% 10 BB+ BB -

KUO - Desc (Mexico) Oct-07 300$ 9.88% 10 BB- BB- -

Grupo Rede (Brazil) Sep-07 175$ 11.13% Perp B B B3

Grupo Senda (Mexico) Sep-07 150$ 10.50% 4 B+ B+ -

TGI International Ltd (Colombia) Sep-07 750$ 9.50% 10 BB BB -

GP Investments Ltd (Colombia) Sep-07 40$ 10.00% Perp B B+ -




Financial Flows to Emerging Markets

Gross Capital Market Flows to

Emerging Markets

0

100

200

300

400

500

600

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

I H 2 0

0 7

Bonds Equity Loans

International Gross BondIssuance

0

10

20

30

40

50

60

70

80

Q 1 0 4

Q 3 0 4

Q 1 0 5

Q 3 0 5

Q 1 0 6

Q 3 0 6

Q 1 0 7

Q 3 0 7

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Non-sovereign

Sovereign

% Non-sov

(USD Bil.)

Source: Capital Bondware and Fitch estimatesSource: IMF

(USD Bil.)




Latam Corporate Issuance Follows Broader EM Markets

0

5,000

10,000

15,000

20,000

25,000

1991 1993 1995 1997 1999 2001 2003 2005 YTD 2007

0

2

4

6

8

10

12

14

16

18

Corp/Util Ave. Life of Issue (yrs.)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Corp/Util Sov/CG/SA /Sup

Source: Capital Bondware and Fitch estimatesSource: Capital Bondware and Fitch estimates




Fitch’s Latin American Corporate Aggregate

-

100

200

300

400

500

600700

800

900

2002 2003 2004 2005 2006

-

1.0

2.0

3.0

4.0

5.0

EBITDA Total Debt Total Debt/EBITDA

-

50

100

150

200

250

300

2002 2003 2004 2005 2006

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

EBITDA EBITDA Margin %

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2002 2003 2004 2005 2006

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Revenues Revenue Growth %

-

20

40

60

80

100

120

140

2002 2003 2004 2005 2006

CA PEX Depreciation

Source: Company Reports, Various Other Data Sources, Fitch Estimates




Liquidity Great For Issuers …. and Creditors?

B+ to CCC Ratings - Category Medians

2002 2003 2004 2005 2006 Average

Liquidity Ratio 0.4 0.6 1.0 2.1 3.8 1.6STD % (STD/TD) (%) 53 44 40 23 10 33LTD % (LTD/TD) (%) 47 56 60 77 90 66

BB+ to BB- Ratings - Category Medians

2002 2003 2004 2005 2006 Average

Liquidity Ratio 2.0 2.2 3.7 7.2 7.4 4.5

STD % (STD/TD) (%) 33 30 25 14 11 22LTD % (LTD/TD) (%) 67 70 75 86 89 77

BBB+ to BBB- Ratings - Category Medians

2002 2003 2004 2005 2006 Averages

Liquidity Ratio 4.8 3.5 5.8 5.6 5.3 5.0STD % (STD/TD) (%) 16 19 12 18 17 16

LTD % (LTD/TD) (%) 84 81 88 82 83 83

A+ to A- Ratings - Category Medians2002 2003 2004 2005 2006 Average

Liquidity Ratio 6. 2 4.6 5.7 9.0 6.7 6.4STD % (STD/TD) (%) 15 12 13 9 10 11LTD % (LTD/TD) (%) 85 88 87 91 90 88

Source: Latin America Company Reports, Various Other Data Sources, Fitch Estimates




EM Corporate Bondholders Exposure to Event Risk

Maverick TubeCorporation - MVK




Greater Focus on Specific Corporate Risks

0

2

4

6

8

10

12

14

16

Company A Company B Company C Company D

“B”

“BB”

“BBB”

“A”

Chile Ceiling A+

Mexico Ceiling A-

Brazil Ceiling BBB-

Argentina Ceiling B+

L o

w e r S o v e r e i g n R

i s k s

Higher Corporate Risks




Latin America High Yield Credits By Country

Other/DR

8%

Argentina32%

Brazil

35%

Mexico22%

Chile

3%

Source: Fitch Estimates, Location of BB+ or Lower Cross Border Latam Issuers




Victory for the Left in Last Elections

Populist Left

Moderate Left

Center-right

Price Controls = Expropriation

New Rules

Increased Government

Involvement

State Model vs. Private Model

Respect for contracts

Nationalization

Higher Taxes




CAGR20062005200420032002

(8.3%)8,56510,60312,33813,88014,596Net Debt

(7.0%)10,43312,42615,17216,58216,060Total Debt

22.9%3,9843,2622,4981,7981,857Capex

9.9%8,7028,7007,6856,7675,815EBITDA

15.7%23,35320,80116,77214,07313,086Revenues

Fitch’s Argentina High Yield Aggregate

14.9%17%16%15%13%14%Capex % Revenue

0.901.231.070.880.610.69Reinvestment Ratio

Averages

34.9%46%37%33%27%32%Capex % EBITDA

1.671.01.21.62.12.5Net Debt/EBITDA

1.961.21.42.02.52.8Total Debt/EBITDA

43.5%37.3%41.8%45.8%48.1%44.4%EBITDA Margin %

Source: Company Reports, Local Stock Exchanges, Fitch Estimates

Significant Underinvestment

Positive Leverage Trend - Restructuring

Credits Metrics Not Comparable WithPeer Group

Average Rating = B




Fitch’s Mexico High Yield Aggregate

CAGR20062005200420032002

(2.3%)5,5065,1845,1875,6176,219Net Debt

(0.7%)6,5006,1715,9236,1136,732Total Debt

33.1%1,292546575553487Capex

7.8%2,0471,5951,5161,3851,470EBITDA

6.4%10,9759,3618,7788,0618,317Revenues

7.4%12%6%7%7%6%Capex % Revenue

1.01.830.840.840.820.67Reinvestment Ratio

Averages

41.7%63%34%38%40%33%Capex % EBITDA

3.532.683.253.424.054.23Net Debt/EBITDA

3.993.183.873.914.414.58Total Debt/EBITDA

17.6%18.7%17.0%17.3%17.2%17.7%EBITDA Margin %

Source: Company Reports, Various Other Data Sources, Fitch Estimates

Stable Margins But Lower Than Peers

Higher Debt Levels –Lower Cash

Historic Underinvestment

Slower Growth Relative to Peers

Average Rating = B+




Summary> Credit fundamentals for emerging market corporates have generally improved, which has

led to positive rating actions and decreased sovereign rating compression in many

countries

> Strong regional economies and globally market liquidity and capital flows over the last two

plus years have lowered certain external risks for most companies at virtually all ratings

levels on average. Although risk of external shock and the economic slowdown in the US

and its impact on EM economies remain the predominate concern.

> First time issuers, generally lower tier names, are entering the market in droves and lack

the same level of sophistication as the “blue chips” adding to risk. These first time issuers

require more attention to stand-alone corporate (idiosyncratic) risks versus the more

traditional systemic risks normally associated with emerging market corporates.

> Key Risks include - consistency of business strategy, quality of reporting, size,

geographic/product diversity, management depth.



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Experiencias Exitosas Recientes de Emisores La Ti No America Nos

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