Bangkok--23 Mar--Moody's
Moody's Investors Service says in a new report that USD bond refunding risk for Asian speculative-grade corporates will be moderate in 2010 but rise next year.
"We think the near-term refunding need for USD bonds maturing in 2010 issued by Moody's-rated speculative-grade Asian corporates is manageable," writes Elizabeth Allen, a Moody's Vice-President and author of the report.
"But this need will rise in 2011 and 2012. The amount needing refinancing in these two years will be higher than the historical average, indicating that this will be a challenging issue after 2010."
"In particular, the USD bond refunding requirement in 2012 for speculative-grade issuers is concentrated among single-B issuers. This is worthy of note, since single-B entities are typically characterized as having limited financial flexibility and sources of alternative funding,"
Allen adds.
Some of these issuers will refinance ahead of maturities, if conditions permit, but their access to the capital markets is highly dependent on market liquidity and investor confidence, and thus is often opportunistic.
In addition, the credit markets are still volatile, even though conditions have improved since late 2008/early 2009.
"An inability to refinance could translate into negative rating migrations or rising defaults. These companies' fairly low ratings already capture this risk, but if refinancing doesn't occur well in advance of maturities, we would expect to take further negative rating actions," Allen goes on to say.
The report, entitled Refunding Risk for Asian Speculative-Grade Corporates in 2010-2012, can be accessed at http://www.moodys.com