Bangkok--14 Aug--Standard & Poor's
Against a harsh economic and financial backdrop, lending conditions are particularly difficult for the weakest borrowers as investors' risk appetite tends to wane, said an article published today by Standard & Poor's. As lending dries up, companies with upcoming principal payments face a heavy burden and the possibility of default.
Chief among these are the firms in the lower ranks of the speculative-grade universe that have both heavy borrowing costs and deteriorating credit quality. Our refunding study focuses on the U.S. companies that are either classified as weakest links or that have bonds trading at distressed levels, according to the article, titled "U.S. Credit Comment: Brother, Can You Spare A Dime? Speculative-Grade Refunding Prospects Face Difficulties Ahead."
Weakest links are companies rated 'B-' or lower with either a negative outlook or with ratings on CreditWatch with negative implications. Distressed issuers are speculative-grade-rated companies that have issues trading at more than 1,000 basis points above comparable treasuries.
"Through 2014, $695 billion in outstanding debt will come due for this subgroup of the speculative-grade universe," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. This debt is composed of corporate bonds, loans, revolving credit facilities, and term loans, with nearly 98% attributable to nonfinancial issuers. The vast majority of the issuers with this debt are currently rated within the lowest rating categories.
"By sector, media and entertainment and finance companies constitute the bulk of maturing debt among the weakest issuers over the next five years," said Ms. Vazza. "Through 2014, the media and entertainment sector will see $140 billion worth of debt mature, while $117 billion is set to mature over the same time period for finance companies."
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Media Contact:
Jeff Sexton, New York (1) 212-438-3448, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760