There are no long-term public bonds in the capital structures of Fitch-rated RUCP issuers. As a result of this, the sector's refinancing risk is likely to remain high for several years with the dominance of short-term domestic bank debt in corporate funding structures, weak operating cash flows, the withdrawal of foreign bank capital, and the low probability of success for any attempts to raise enough new equity to make any real positive impact on liquidity. The aggregate total short-term debt of Fitch's rated universe of RUCP issuers is approximately USD1.5bn equivalent, accounting for 45% of total gross debt of USD3.3bn - in a weak market context, this level represents significant credit risk.
Across Fitch's universe of RUCP issuers, balance sheet cash is low, committed undrawn facilities are largely absent (committed undrawn facilities/short-term debt at only 15%, compared with 234% for UK property investment companies) and, in all cases, these issuers are free cash flow negative. In summary, the total sources of liquidity available to meet upcoming debt maturities are highly constrained and hence default risk is significantly heightened, as reflected in Fitch's ratings.
Fitch's entire rated universe in this sector falls into the 'weak' categorisation of relative liquidity analysis. Liquidity scores (sources of liquidity to uses of liquidity over a 12 month period) are less than 1x (ranging from 0.03x to 0.7x), indicating an unhealthy reliance on the decisions of domestic and international banks to extend loan maturities and/or provide new financing to deal with upcoming debt maturities.
