Bangkok--5 Jun--Standard & Poor's
In contrast with banks or speculative-grade-rated entities, funding costs for investment-grade nonfinancials are lower in the bond market, said an article published today by Standard & Poor's. The flight to quality has clearly turned the tide of investor appetite in the favor of investment-grade companies. And the issuers that have lower ratings and greater funding needs are left with more convincing to do of investors and lenders.
Nevertheless, a closer investigation of investment-grade debt management suggests that even blue chip companies have had to make adjustments to overcome the limited availability of funding that has resulted from the financial volatility, according to the article, titled "U.S. Investment-Grade Nonfinancials Have An Easier Road To Obtaining Financing, But It's Not Without Obstacles." And as financing conditions have changed, these issuers have had to adapt their funding strategies.
"Despite the notable spread contractions in May, long-term funding availability remains more accessible for highly rated nonfinancials than for their counterparts in the banking and financial services segment, which have experienced a substantial pullback," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
"Nevertheless, nonfinancials continue to face nuanced challenges in terms of managing their funding requirements, particularly at shorter tenors," said Ms. Vazza.
These nuances might be less visible because the arrangements (e.g., revolving credit lines) tend to be privately negotiated. Furthermore, financial sector consolidation in the wake of the credit crisis might also constrain lending to some large corporate borrowers owing to limits on single-name exposure, even if lenders have no fundamental concerns regarding the borrowers' credit quality.
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