OREANDA-NEWS. Fitch Ratings expects operating cash flows of Latin America credits to remain under stress during 2016. Defaults are at a level not seen for the past decade, with eight issuers defaulting on USD4.5 billion of debt. About one-third of the defaults YTD are related to Brazilian construction companies tied to the Petrobras Lava Jato scandal.

'Downgrades will continue to outpace upgrades for the 50 largest high-yield Latin American corporates as 34% of the issuers have either a Negative Outlook or are on Watch Negative,' said Joe Bormann, Managing Director at Fitch. Pressure on government revenues has led to tax measures that have weakened consumers and hurt corporate cash flow. Consumer confidence will remain weak and unemployment levels will climb. Fitch downgraded nine 'BB' rated issuers to the 'B' category during 2015.'

There has been a dearth of high-yield issuance activity during the first 11 months of 2015. Only eight issuers have tapped the cross-border debt market, raising $7.6 billion. This figure pales in comparison to $25.3 billion of high-yield bond activity during 2014.

While there was only USD6 billion of Latin American capital market debt amortization during 2015, this figure is forecast to rise to USD14 billion in 2016 and USD28 billion in 2017. High-yield issuers' debt accounts for USD5 billion of the 2016 figure and USD14 billion of 2017 obligations. During 2017, nine issuers in the speculative 'B' and lower categories face USD11 billion of debt maturities. About USD9 billion of the latter figure is PDVSA debt, which is subject to high repayment risk.