Fitch downgrades Atento’s rating

ILLINOIS, UNITED STATES — Credit rating agency Fitch Ratings recently downgraded Atento Luxco 1’s long-term foreign currency issuer default rating from “B-” to “CCC” to reflect the firm’s very low margin of safety. 

According to Fitch, the downgrade is an effect of the elevated uncertainty on Atento’s ability to service its debt and derivative obligations, given the lack of progress in obtaining additional liquidity. 

The company faces large payments in derivative positions tied to Brazil’s CDI (interbank deposit) rates while servicing short-term and unhedged debt with very limited liquidity. 

Aside from uncertainty with Atento’s services, Fitch’s decision is also the cause of the company’s weak liquidity-pressured cash flow, overcapacity in hurting margins, and its weak operating performance.

The ratings also reflect intrinsic client concentration in telecommunications and the financial sector, no minimum volumes, and limited ability to collect penalties from large clients. 

Atento’s challenges include replacing declining traditional voice revenues with more value-added services. 

Its EBITDA (Earnings before interest, taxes, depreciation, and amortization) margins in the last three years were below those of other CRM/BPO companies, such as Teleperformance S.A. and TTEC Holdings, Inc., all at 10%-20%.