Despite the economic tumult of the worldwide pandemic in 2020,
has seen little change in the number of rated Peruvian non-financial and infrastructure companies with low or medium liquidity risk.
In fact, nine of the 17 companies in its annual study have low or medium liquidity risk today, and eight have high liquidity risk.
Yet only four have committed credit lines, a general vulnerability for Peruvian corporate liquidity.
"About half of Peru's companies will generate positive free cash flow in 2021 as they catch up with expenses and investments shelved during the pandemic," the credit rating agency projected.
According to Moody's, liquidity will strengthen for Peru's (A3 negative) commodity producers in 2021 as business conditions improve.
Southern Copper's (Baa2 stable) large scale, geographical diversification, conservative financial management, and strong balance sheet have helped to keep its liquidity risk low.
For its part, Minsur's (Ba3 positive) free cash flow and leverage will benefit from the completion of its Mina Justa mine.
Among other companies, agricultural producer Camposol (Ba3 stable) refinanced all of its debt in early 2020.
"Most Peruvian corporate debt comes due starting only in 2024, a comfortable maturity timeline overall. Speculative-grade companies represent about US$1.0 billion of Peruvian companies' US$1.8 billion total outstanding short-term debt and 63% of total debt maturing in 2021-22, down from 70% a year ago," Moody's said.
The coronavirus outbreak restricted Peruvian companies' access to international capital markets, but companies such as Buenaventura (B1 review for downgrade) actively worked to refinance bank debt, while others began tapping international markets in late 2020.
Liquidity for Peru's non-financial companies still lags that of their peers in Mexico and Chile. Peruvian companies do generally not have access to committed revolving credit facilities, rolling over short-term debt with local banks instead —a disadvantage during an economic downturn, even for companies with longstanding relationships with domestic banks.
The lack of committed credit lines is particularly stressful in cyclical industries such as agriculture, fishing and mining, but liability management helped Peruvian non-financial companies improve their short-term debt-coverage ratios significantly.
Most of the Peruvian companies covered by Moody's in its study generate most of their revenue and report in US dollars, a natural hedge against their dollar-denominated debt. The Peruvian Soles' depreciation even benefits them, since they generate revenue in US dollars but generally have most costs denominated in Soles.
Ten of the 17 companies studied generate some 92% of their EBITDA in foreign currency.