Corporate Brazil faces cash risks through 2017 -Moody's

SAO PAULO, May 2 (Reuters) - More Brazilian companies will face increasing liquidity risk through next year as rising borrowing costs and the harshest recession in decades hamper their ability to service debt, Moody’s Investors Service said on Monday.

A Moody’s team of analysts led by Erick Rodrigues said in a report that the number of companies facing high funding risks rose to 33 percent last year, from 28 percent in 2014. More debt is maturing than companies can generate cash to make payments, while banks are refinancing fewer loans, the analysts said.

The report underscores the problems in Brazil’s strategic industries, which are reeling from the country’s worst recession in over a century, slumping global commodities prices and fallout from a corruption scandal at state firms. Some economists have said the downturn has been the worst since 1901.

The scandal and a probe known as “Operation Car Wash” are hampering the ability of oil, engineering and services companies to honor their debt, a recent central bank report showed.

Companies have been selling assets, cutting costs or downsizing to conserve cash, but raising funds has been a challenge for the oil and gas, homebuilding, transportation, telecommunications and media, and metals and mining industries, Moody’s said.

Downgrades by rating agencies of Brazil’s sovereign debt to below investment-grade since last year have led to “higher interest rates, more selective lending, and more expensive risk premiums, all of which sharply reduced capital market activity and made banks more cautious,” the report said.

With bankruptcy filings up 150 percent this year and the economy poised to contract by about 4 percent for a second straight year, lenders are cutting credit access for small and large corporate borrowers, or refinancing loans only for existing clients. Banks had about 130 billion reais ($37 billion)in refinanced and restructured loans on their books last year, according to central bank data.

The report used different gauges to measure 24-month sources of liquidity risk for 46 Brazilian non-financial and non-utility companies. These include miner Vale SA, steelmaker Cia Siderúrgica Nacional SA, homebuilder PDG Realty SA and state-controlled oil producer Petróleo Brasileiro SA.

$1 = 3.4934 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Richard Chang