US high-yield debt maturity wall pushed back to 2017; Moody's
Feb 6 (IFR) - Th maturity wall of US speculative grade debt has been pushed to 2017, but global macro issues could still disrupt market access, according to Moody's.
US speculative-grade companies have US$645bn of debt maturing in the next five years, including US$411bn of bank credit facilities and US$234bn of bonds, the agency said in a report.
This is down modestly from last year's US$668bn of five-year maturities. However, the peak maturity year has been pushed out by a year. The peak year for maturities is now 2017, when US$258bn of speculative-grade bonds and credit facilities comes due. A year ago, maturities were set to peak in 2016 at US$246bn.
Moody's said that while near-term refinancing risks appear modest, the increase in refinancing needs over the ensuing three-year period, 2015-2017, has heightened the intermediate risk.
"Companies will remain vulnerable to the possibility of rising interest rates and widening spreads," said Moody's analysts. "The risk of wider spreads and/or higher rates would result in higher financing costs and could reduce market access."
The telecommunication/technology/media sector has the highest percentage of speculative-grade debt maturing over the next five years, accounting for 27% of US$172bn of the five-year total. This includes debt at Clear Channel Communications and Clearwire Communications.
For 2013 through 2015, refinancing needs for high-yield bonds and loans is relatively modest, at US$200bn.
However, Moody's said that the pull-forward effect, which refers to the accelerated refinancing of several maturities contained in the same bank credit agreement when the first debt instrument comes due, could double the maturities of bank credit facilities alone to US$243bn from US$111b over the next three years, and total debt maturities could rise to US$332bn from US$200bn.
Moody's said that while corporate debt issuance is expected to remain strong amid low interest rates and gradual economic recovery, risks do remain as global macroeconomic concerns persist. These risks include the US debt ceiling and broad spending cuts, US monetary policy, increase in Treasury yields and a renewed flare-up in Europe's sovereign debt crisis.
Lower-rated companies with near-term maturities are most at risk. Moody's list of the top 25 debt issuers rated B3 negative or below holds US$86bn of debt, including US$14bn due in 2013-2014. The largest issuers in this category are Texas Competitive Electric Holdings, Clear Channel Communications and Caesars Entertainment Operating Company.