Companies should have plenty of cash on hand for the year ahead, according to a new report from Moody’s Investors Service.
The rating agency reports that the liquidity profile for non-financial corporates in Canada, the US, and Latin America continues to improve “as companies built cash balances and took advantage of refinancing opportunities to push out debt maturities during 2011”.
The rating agency finds that 96% of companies are expected to have sufficient liquidity to cover debt maturities and other cash outflows over the next 12 months.
“This compares favourably to the 94% result in our July 2009 report and is the highest recorded since the onset of financial market turmoil in 2008,” said Dean Diaz, vice president and senior credit officer at Moody’s. “Companies reacted to market disorder by conserving cash and building liquidity.”
However, Moody’s notes that this liquidity position may be near its peak “as companies face the potential for economic weakness that could undercut financial performance. Any additional financial turmoil could limit capital access.” Alternatively, it says that, if economic and financial conditions improve, corporates will face renewed pressure to finance growth and return cash to shareholders.