Doing the Right Thing

Jul 1, 2002

Even if it hurts, Latin American companies recognize the need to look to the equity markets as a way to rebalance capital structures weighed dwon by debt and Brazil is leading the way. The challenge is to drum up investor interest.

Globocabo, Brazil's leading cable company, is facing a stark choice. It can either restructure its debt or sell out to a competitor. Its parent company, Organizações Globo, the overleveraged media group, is also in trouble as the cost of servicing its dollar-denominated debts rises with the decline in value of the real. Globo is mulling a R$1 billion ($378 million) public equity offering on the São Paulo Stock Exchange. Telesp Celular Participações, the Portuguese-owned cellphone operator, is also overextended and it too is considering a plan to rebalance its capital structure through a local equity offering. Latin American companies that raised dollar financing when there was easy access to the debt capital markets now are struggling to cope with their debt burden, and for many, the equity markets are beginning to look less forbidding than before. "I think the difficulties that companies in the region have faced in the...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management