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Moody’s: EMEA non-financial companies retain strong liquidity

Negative GDP growth forecast for Ukraine, Russia

The liquidity of non-financial companies in Europe, the Middle East and Africa (EMEA) remains strong, with 95 per cent of firms able to meet their cash requirements over the next 12 months, according to a new survey. The companies will stay on track even if there is no access to new funding during the period, says bond credit rating agency Moody’s Investors Service.

Moody’s currently forecasts stronger near-term GDP growth in Spain and Portugal and, to a lesser extent, in Italy, which should be somewhat supportive of liquidity for companies in those countries.

By contrast, Moody’s EMEA Non-Financial Corporates: 10th Annual Liquidity Study forecasts negative GDP growth this year for Ukraine and Russia, where access to international capital markets has become more difficult for corporate issuers. Moody’s, however, notes that the large majority of rated companies in Russia retain adequate liquidity for at least the next 12 months.

“In the past, concerns about liquidity were focused on companies in Italy, Spain and Portugal given their exposure to the financial and economic crisis, but the key liquidity indicators in those countries are now quite stable and fairly strong,” says Richard Morawetz, credit officer for the corporate finance group at Moody’s. “While liquidity is currently satisfactory for most rated companies in Russia, we will continue to monitor economic trends as well as companies’ ability to refinance pending debt maturities.”

Moody’s is also closely monitoring companies that are either domiciled in Greece or have their headquarters there with regard to their exposure to the Greek economy, which is often very limited. It also looks at their diversification of lenders, as well as the jurisdiction that governs their debt instruments, which would be relevant in case of a currency redenomination.