Latam, Avianca Cut Deeper Into Junk by Fitch Amid Economic Woes

  • Economic outlook in Latin America hurts ability to cut debt
  • Latam now rated B+ by Fitch, while Avianca was cut to B

Latam Airlines Group SA and Avianca Holdings SA were both downgraded further into junk territory by Fitch Ratings, which said that the economic slowdown in the region will be an obstacle for them to cut debt.

Fitch cut Latam’s long-term foreign currency credit grade one step to B+, four levels below investment grade. The outlook for the Santiago-based carrier was also revised to negative from stable, the rating company said. Panama City-based Avianca was lowered two steps to B and the outlook was kept at negative, according to a separate report.

Latin America’s economy is forecast to shrink 1 percent in 2016 after contracting 0.6 percent in 2015, according to economists surveyed by Bloomberg, led mainly by Brazil, which is going through its deepest recession in a century at the same time President Dilma Rousseff tries to stave off an impeachment process amid a corruption scandal.

Both Latam Airlines and Avianca reported unexpected losses in the fourth quarter.

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