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Moody's: Chilean non-financial corporate liquidity risk offset by solid credit profiles

Global Credit Research - 07 May 2014

Buenos Aires City, May 07, 2014 -- Moody's-rated Chilean non-financial corporates continue to have solid credit quality, Moody's Investors Service says in a new report, "Low Liquidity Cushion, but Solid Credit Profiles." Eight of the nine companies are investment grade, though just three have medium or low liquidity risk.

"Of the companies we reviewed, six have a weak liquidity cushion relative to their upcoming cash needs," says Vice President -- Senior Analyst, Veronica Amendola. "Nevertheless, most non-financial companies in Chile benefit from sustained access to bank funding in the local credit markets, strong market positioning and the country's favorable macro environment."

Chile is an investment-grade country with strong credit metrics and ample fiscal flexibility to cope with downturns, Amendola says. Its predictable and stable macroeconomic environment encourages investment, with low volatility of expected returns.

Local financial institutions are Chilean corporates' main source of financing, followed by offshore banks and the international capital markets. Access to international credit markets is a positive development, Moody's says, and has been aided by companies' expansion into neighboring countries and the US. Tapping the international markets allows for longer debt maturities and helps Chilean companies hedge their foreign-currency exposures.

And foreign-currency exposure is high. Repeated devaluation of the peso last year negatively affected the credit metrics of Chilean corporates with debt denominated in US dollars and revenues generated in local currency. Among companies, commodity producers and companies with export-based business models are less exposed due to their natural hedge against the risk of currency depreciation.

Chile is highly dependent on commodity exports. Indeed, natural resources companies accounted for 54% of the Moody's-rated companies' revenues and 69% of their debt at the end of 2013. The new report discusses copper producer Codelco, pulp and paper company Arauco, retailers Cencosud S.A. and SMU S.A. and telecommunications company Empresa Nacional de Telecommunicaciones S.A., among others.

Moody's research subscribers can access this report at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_169881

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Veronica Amendola
Vice President - Senior Analyst
Corporate Finance Group
Moody's Latin America Agente de Calificación de Riesgo
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Marianna Fernandes Rodrigues Waltz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Releasing Office:
Moody's Latin America Agente de Calificación de Riesgo
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Moody's: Chilean non-financial corporate liquidity risk offset by solid credit profiles
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