So far in 2011, debt issuance has been strong, and Standard & Poor’s expects that most corporate entities will be able to meet their refinancing needs through the rest of the year. However, the amount of maturing debt increases significantly in the following years, and demand for corporate debt might not remain as strong given the sluggish economic recovery, likely rising interest rates, and sovereign debt problems in parts of Europe and instability in the Middle East.
Standard & Poor’s Global Fixed Income Research conducted a study to analyze corporate refunding needs over the next few years. In the article published on Wednesday, titled “Q&A: Global Refunding Study Highlights Mounting Debt Maturities,” we address the main findings of our study.
“We also examined the debt maturities for the US, Europe, and the Other Developed region. Details, can be seen in US Refinancing Study: Rising Maturities Could Increase Refinancing Risk, Especially For ‘B’ And ‘CCC’ Rated Issuers,” “Australia, Canada, Japan, and New Zealand have nearly $1.1 trillion in debt maturing through 2015,” and “nearly $4 trillion of European corporate debt will mature through 2015.”
“Based on our database, we estimate that about $8 trillion in debt will mature from the second quarter of 2011 through the end of 2015. In 2011, about $1.4 trillion in debt will come due,” said Diane Vazza, head of Standard & Poor’s Global Fixed Income Research. “We generally expect that the markets can handle this amount given the robust new issuance activity so far this year.”
“In the following years, we are not sure that there is enough demand to meet the substantial debt refinancing needs,” said Vazza. “In 2012, more than $2 trillion of corporate debt will mature, $1.8 trillion in 2013, almost $2 trillion in 2014, and $1.6 trillion in 2015.”
Entities domiciled in Europe account for about half of the $8 trillion total. US entities account for 36%, entities based in other developed countries i.e. Australia, Canada, Japan, and New Zealand account for 14%, and companies in the emerging markets account for 0.3%.
“We note that the figures represent the debt of Standard & Poor’s rated entities. So markets that are less developed may have significant nonrated maturing debt that we do not include in our totals. This is likely the case with emerging markets and the speculative-grade segment in Europe. For example, Europe’s leveraged debt market is very active, but a significant portion of its activity is not rated. We think that there is real risk in Europe’s leveraged debt markets that is not evident when looking at just the rated universe,” S&P said.