Europe, the Middle East and Africa (EMEA) non-financial companies (NFCs) in key commodities fields are more prone to liquidity woes in the region than firms from any other sector, according to a new report from ratings agency Moody’s.
Published on 7 April, Moody’s latest Liquidity Stress Index noted that the region’s share of speculative-grade oil, gas, metals and mining firms that are currently facing liquidity pressures has more than doubled – from 11% a year ago to 23% last month.
A declining ability among high-yield corporations to raise debt could push the stress level even higher this year, the agency warned.
Moody’s vice president and senior analyst Tobias Wagner said: “While there is increased liquidity stress concentrated in the EMEA commodities sectors, average liquidity currently remains stable among EMEA speculative-grade NFCs.
“However,” he added, “if the difficult, high-yield issuance market environment persists, liquidity concerns could spread to lower-rated companies in other sectors in 2016 – particularly for companies rated B3 and lower that have debt maturities in 2017 or 2018.”
According to the Index, the liquidity profiles of oil, gas, metals and mining companies in all major regions – including the US and Asia – are on a downward trend.
But Moody’s noted that, in the EMEA region in particular, natural resources companies now make up 30% of all speculative-grade firms with the weakest liquidity – up from 18.5% a year ago.
The Index emerged just two days after the FTSE troughed to its lowest level since early March – depleted by a 3.1% fall in the UK mining index – with falling oil and metals prices blamed for the drop.
CMC Markets analyst Jasper Lawler told news agency Reuters: “A three-week low in the price of oil goes some way to explaining deteriorating market sentiment. Some heavy declines in industrial-metal prices… are taking a toll on the UK-listed mining companies.”
Moody’s subscribers can access the full Liquidity Stress Index here.