Refinancing risk in Asia likely to stay low over next 5 years

Refinancing risk in Asia-Pacific will remain low over the next five years, with most of the maturing debt in the investment-grade category, says S&P Global Fixed Income Research.

It noted that about US$1.2 trillion (S$1.7 trillion) of Asia-Pacific financial and non-financial corporate debt rated by S&P Global Ratings is expected to mature from the second half of this year through to 2023.

"About 90 per cent of the total maturing debt in the region is in the investment-grade category, which tends to have longer maturities and lower financing costs," said S&P Global Fixed Income Research head Diane Vazza.

But other key risks remain, including higher borrowing costs from rate hikes in the United States, the refinancing of dollar-denominated debt (due to an appreciating dollar), capital market volatility and declines in investor sentiment.

Speculation about a turn in the US credit cycle may concern maturing debt at the lowest rating levels, usually the most susceptible to refinancing risk if firms face adverse market conditions.

However, only US$17 billion of Asia-Pacific debt rated B-or lower will mature in 2018 to 2023, and the largest share of this is from Chinese issuers.

The maturing debt in the Asia-Pacific forms about 11 per cent of the total maturing globally.

About three-fifths of the debt belongs to corporate entities in Japan, Australia and New Zealand, with Australia accounting for over one-third of the total.

A version of this article appeared in the print edition of The Straits Times on November 21, 2018, with the headline 'Refinancing risk in Asia likely to stay low over next 5 years'. Print Edition | Subscribe