Bangkok--21 Jul--Standard & Poor's
Refinancing risk in corporate Asia is at a crossroads, said an article published today by Standard & Poor's. Buoyancy in the primary bond markets and expectations that the region will emerge first from the global recession should improve investor sentiment, offering relief for issuers that have significant pipelines of debt coming due. The region has fewer total dollars at risk in terms of rated refunding exposure compared with other regions.
Nevertheless, banks--which still constitute the lowest-cost source of capital for the region--remain circumspect about lending, causing credit growth to decelerate. The pool of available lenders willing to supply funds has shrunk, owing to global banks' pullback from the Asian markets, according to the article, titled "Improving Sentiment Eases, But Does Not Erase, Corporate Refinancing Risk In Asia-Pacific (Premium)."
Although regional banks remain active and in relatively good health compared with their western peers, they are more likely to preserve relationships with the strongest issuers in an effort to preserve healthy risk margins. Entities with ample covenant headroom, or those well positioned to renegotiate loan terms or secure covenant waivers, will encounter the least rollover risk. However, for issuers with weaker fundamentals, available refinancing options remain constrained.
"We estimate that a cumulative total of $669 billion of corporate debt, including nonfinancials and financials, will mature or come due for refunding from mid-2009 through year-end 2012 from Asia-based companies," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "By contrast, we expect $3.9 trillion to mature among European entities, and $2.8 trillion is due in the U.S."
Much of the region's rated corporate debt exposure (including financials and nonfinancials) is concentrated in Japan and Australia, countries with the most developed capital markets and the headquarters for several global firms with significant cross-border operations.
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