Double-Digit Rates to Bite Brazil Companies as Easing Stalls.

Brazilian companies that took on cheap debt are facing the reality of double-digit interest rates for a longer period than expected. The Central Bank of Brazil is expected to hold the policy rate at 10.5%, and borrowing costs will remain above 10% in the foreseeable future. This poses a challenge for companies with floating-rate debt that they planned to refinance when rates were lower. The situation in Brazil is unique as policymakers were among the first to raise rates and start cutting. Companies in Brazil face significant maturities in local and overseas bonds, and sales of dollar bonds have decreased. While liquidity in the local market is ample, borrowing remains expensive. Credit conditions have eased, but the benchmark Selic rate is not low enough to give companies relief. There has been an increase in companies filing for judicial recovery, particularly in the agriculture sector. Retailers, health-care companies, and airlines have also struggled with heavy debt. This sets the stage for more restructurings and liability management exercises. [Extracted from the article]