OREANDA-NEWS. The economic environment is challenging for Colombia corporates due to a variety of factors that have led to lower cash flow generation and increased leverage, according to a new Fitch Ratings report.

"There are many obstacles to liquidity for Colombian corporates. Some include adverse external trading conditions, inflationary pressures, higher debt service cost, volatile foreign exchange rates and a slowdown in consumption," said Julian Robayo, Associate Director. "Additionally, tax reform may hurt corporates and return on investment."

Cash flow from operations contracted about 26 percent during 2015. Lower dividends relieved pressure on free cash flow, but not enough to prevent average negative free cash flow among rated Colombian corporates. Positive free cash flow is not expected in 2016.

Leverage continues its upward trend in 2016, with deleveraging not expected until 2018. Market factors led to an increase in total debt/EBITDA and net debt/EBITDA of 2.7x and 2.3x, respectively, in 2015 from 2.2x and 1.7x, respectively, in 2014.

Long-term debt profiles and the ability to tap the local bond markets in 2016 and 2017 limit Colombian corporates' exposure to refinancing risk. Total bond maturities in the domestic and international markets in 2016 and 2017 are a manageable COP2,900 billion, or approximately USD940 million, among 15 companies.

Forty-three percent of Colombian corporates face FX risk due to U. S. dollar dominated debt or cash flow exposure.