Nearly all countries in South and Southeast Asia have protection in place against a significant rise in debt levels or borrowing costs, or a contraction in earnings before income tax, depreciation and amortization (EBITDA), if their local currencies were to depreciate up to 15 percent against the US dollar, Moody’s Investors Service (Moody’s) said.

“Twenty-seven companies generate nearly all of their revenues in US dollars or have contracts priced in US dollars providing natural hedges that limit the risk of local currency depreciation against the US dollar,” Annalisa DiChiara, a Moody’s Vice President and Senior Credit Officer, said.

“Another seven generate 15 percent-25 percent of their revenue in US dollars, have US dollars in cash on their balance sheets, have financial hedges or longer-dated maturities, or some combination of these protections,” DiChiara added.

“And three Indonesian property companies use long-term hedges, which protect the principal amounts of their US dollar debt against a depreciation of the Indonesian rupiah up to predetermined levels,” DiChiara said.

Moody’s said three companies have no specific protections, but their leverage and stable or growing EBITDA help limit the effect of currency depreciation, while four companies have less than 10 percent of their total debt denominated in US dollars, and this low exposure makes protections unnecessary.

Moody’s conclusions are contained in its just-released fifth annual report on this topic, “High-yield corporates – South and Southeast Asia: Most rated companies have protections against their exposure to US dollar debt”.