Short-term doubts weigh on AG

Andrade Gutierrez (AG), amongst Brazilian companies, is identified as one of those who may have more difficulties in this crisis. Lucror Analytics assessed that they are related to problems in the construction sector, which is one of the most cyclical. But also points out the company's little access to credit, due to the problems related to Lava Jato. In the financial field, the company has no hedge (protection exchange rate) for payment of bonus interest coupons due this year, of approximately $ 40 million. In addition, it has leniency agreement payments.

Also taking all this into account, at the end of April, Fitch Ratings downgraded Andrade Gutierrez's long-term issuer ratings (IDR) Foreign currency and local engineering from 'CCC +' to 'CCC-'. Fitch also downgraded the rating of senior notes with guarantee and maturity to 'CCC- / RR4' 2021 and 2024 of Andrade Gutierrez International.

The agency cited the company's high refinancing risk and the strong pressure on liquidity, amid a scenario of strong economic slowdown. Pointed a weak cash position of R $ 400 million to support debt repayments, coupon payments and fines throughout 2020. For Fitch, the company is “Highly exposed to the decision to repay debt payments and interest coupons around R $ 400 million in 2020 or preserve cash strategically for sustaining its operations, ”according to the report. Andrade Gutierrez did not gave an interview.

Despite this delicate scenario outlined by the agencies, the company's bonds reach highs of almost 30% in one month. According to investors heard by Valor, the question is that the agencies are looking at a photograph of the company from the end of last year. But, since then, she has been spreading news that feeds the expectation that she there will be no liquidity problems in the short term. The first quarter result came out in early June.

In the last few months, 65% of the company's contract portfolio has been concentrated in outside. As it has revenues growing in euros and dollars, the devaluation of the real will not affect it's ability to pay the coupon. For that reason she would have chosen to do not bear the payment hedge costs.

The company is working on infrastructure projects in Mozambique, Angola, Ghana, Dominican Republic and Portugal. In the first quarter, it closed contracts totaling R $ 1.5 billion - 80% of this amount in “hard currency”. This amount is higher than revenue of the period, which was R $ 1.1 billion, an increase of 300%. For investors, if the that was hired exceeds revenue, the signal is that the company will deliver growth ahead.

The pandemic affects operations as it has had to halt works. That means stopping production and receive less, but also spend less - 80% of the cost is variable, if there's no work, it doesn't happen. Leniency fines are also being paid in day.

The thesis of investors who bet on the company's role and liquidity in the short term will be proven or not at the end of the month. On June 30 the company has to pay a $ 20 million coupon; another $ 20 million is due in December. At the end of last year, Andrade refinanced its debt by issuing US $ 425 million, and this year there is nothing due, only interest.

In the long run, from the point of view of the exchange variation on the principal of the company, which matures in 2024, possibly the company's cash generation will not be enough and there should be new refinancing.

By Ana Paula Ragazzi - From São Paulo