Debt restructuring, M&As expected to rise in LatAm

M&As and debt restructuring are likely to increase across Latin America as companies face financial challenges due to the economic impacts of the COVID-19 outbreak.

"There is a curious situation going on with this crisis. There are so many liquidity measures adopted by local governments, which is generating many opportunities for M&As in various sectors," Clovis Meurer founder of Brazilian private equity and venture capital association ABVCAP, told BNamericas.

"There are companies raising cash, wanting to buy rivals to consolidate their presence and others seek to sell their assets, as they perceived that there is a lot of money in the market, injected by governments," Meurer added.

The pandemic’s impacts are reflected in the Economic Commission for Latin America and the Caribbean’s (ECLAC) forecast of a 9.1% recession this year.

This recession will increase risks for companies as their debt profile deteriorates.

Fitch Ratings said the number of Latin American non-financial corporate cross-border issuers rated 'CCC+' and lower – low speculative grade – surged this year. It is now 17% of the total regional corporate ratings portfolio, compared with 6% a year ago.

Total debt with equity credit for issuers rated 'CCC+' and lower, excluding those in the process of a distressed debt exchange, totals more than US$36bn, according to Fitch.

This level of debt at risk is generating opportunities for specialized debt restructuring firms. 

One such company, Pantalica Partners opened a branch in Paraguay in July, focusing the agribusiness sector.

"We have a good relationship with various tradings and service providers linked with agricultural producers. We will start our operations with at least five large customers", according Bruno Carvalho, a founding partner of the company.