(Corrects debt issuance figure for 2013 in 4th paragraph)
LONDON, March 19 (IFR) - Bankers expect European corporates will have little trouble refinancing the more-than USD4tn of debt Standard & Poor's said was set for maturity over the next five years.
The agency said on Monday that USD4.1tn of debt it rates was due to reach maturity between 2014 and 2018, almost half of the USD8.9tn maturing global debt.
Of these European bonds, 86% were issued by investment-grade corporates, which should have little trouble refinancing if they decided to return to the debt market, according to bankers.
Investment grade corporate bond supply in euros has hit just over EUR50bn so far in 2014. By this time last year, like-for-like volumes stood at some EUR45bn. European corporate issuance in the whole of 2013 was down 6% at EUR46bn.
Given this market confidence, corporates may look to benefit from access to longer-dated maturities, said Nicholas Bamber, head of investment grade bond origination and private placements at RBS.
"Borrowers continue to raise funding at very low rates," he said. "Single A issuers are issuing 10- to 15-year money at 3 to 4% coupons. That is cheap by any historical standard."
Some USD2.4tn of the debt maturing is from financials, but a need to deleverage in response to regulatory requirements means banks have reduced funding needs. A report by Moody's on Tuesday showed European bank debt issuance was down 25% year-on-year.
BANKS' CAPITAL NEEDS
Average Core Tier 1 ratios are up to 12.4% from 11.1% a year ago, according to Morgan Stanley data, and Bamber said banks would primarily look to the debt market to further strengthen capital reserve requirements.
"The big banks' need for senior funding is limited," said Bamber. "Rather the focus is on capital transactions."
The debt market is not the only source for fund raising and, after a pick-up in the equity market last year, some corporates may look to stocks for their fundraising needs, either through convertible bonds or straight equities. By the end of the first week of March, European IPO activity had tripled to USD12bn so far this year against the same period in 2013, Thomson Reuters data showed.
"The equity market being strong, for the first time there's choice offered to corporates," said Tanneguy de Carne, head of high-yield at Societe Generale in London. "They don't have to rely exclusively on the debt market."
S&P said USD558bn worth of speculative grade bonds would reach maturity by 2018 and de Carne said these companies would be welcomed by the debt market should they issue fresh paper.
"The problem is not, can we cope with the supply?" he said. "Our problem is that we don't have enough supply." (Reporting by Joshua Franklin; Additional reporting by Josie Cox; Editing by Alex Chambers and Julian Baker)