OREANDA-NEWS. July 13, 2015 Fitch Ratings has released a special report: 'Family-Owned Peruvian Corporates - Keeping it in the Family' that examines the credit trends between the family-owned (FCs) and non-family owned (NFCs) international corporate issuers in Peru. FCs in Peru comprise 60% of Fitch's Peruvian corporate ratings universe. The analysis compares the historical track record of FCs and NFCs for leverage, liquidity, capex and dividends, among others, to differentiate ownership behaviour trends from 2008 to 2014, a period of an unprecedented volume of debt issuance by Peruvian corporates in the international capital markets.

'Fitch observes that Peruvian corporates that are majority-owned by a family have tended to pay out higher dividends as a percentage of net income over the last seven years when compared with other non-family-owned corporates' said Jay Djemal, Director in Fitch's Latin America Corporate department. The median seven-year dividend pay-out ratio has been 26% of net income for FCs compared with 12% for NFCs. 'The higher dividend payments by FCs usually stay within the family group; they are used to fund complementary investments or diversify into new markets and businesses', Djemal added.

Examples of FCs reinvesting dividends among the family group include Corporacion Azucarera del Peru S.A. (Coazucar; 'BB'/Negative Outlook) acquired by Grupo Gloria, a conglomerate with companies in the food, cement, agriculture and paper businesses among others;, and Minsur S.A. (Minsur; rated 'BBB-'/Stable Outlook) which contributes significantly to the Breca Group, owner of a number of businesses across diverse sectors in Peru.

Peruvian companies used their recent access to international capital markets to fund large capex and investments that could not be locally financed, resulting in increased debt balances over the period. FCs maintain lower leverage on average with average gross debt/EBITDA of 2.7x compared with NFCs 3.5x.

Peru's FCs contain a significant portion of issuers in industries such as consumer goods and mining, where balance sheets contain a high proportion of working capital loans and revolving credit facilities, while the NFCs operate predominantly in the stable energy and power sector. As a result, NFCs exhibit moderately better short-term debt profiles than their FC peers, with NFCs reporting an average of 16% short-term debt to total debt versus 28% for FCs.

Corporates in Peru have issued debt in the international capital markets at an unprecedented rate over the last half decade, used to fund ambitious investments in line with the economy's anticipated future growth and to meet the appetite for its commodities and goods abroad. In conjunction with the economic growth in Peru, some FCs have diversified into new sectors, as seen with Intercorp Peru Ltd (Intercorp, rated 'BBB-'/Stable Outlook).