INSTITUTIONAL INVESTMENT | Staff Reporter, Singapore

Emerging Asia's maturing debt hit $168b

It has the largest share globally.

In a release, Standard & Poor's Global Fixed Income Research expects about $395 billion in financial and nonfinancial corporate debt that Standard & Poor's Ratings Services rates to mature in the emerging markets from April 1, 2013, through year-end 2017, said an article published today, titled "Emerging Markets Refinancing Study: Emerging Markets Corporates Face About $400 Billion Of Maturing Debt By Year-End 2017." 

Emerging Asia accounts for the largest share, with $168 billion of maturing debt (or 42% of the total), while Eastern Europe, the Middle East, and Africa accounts for $122 billion (about 31%) and Latin America and the Caribbean account for $105 billion (about 27%).

Although investment-grade entities (those rated 'BBB-' and higher) represent 44% of the outstanding ratings in the emerging markets, they account for approximately 73% of the total debt maturing through 2017. Investment-grade entities account for 84% of the maturities in the financial sector and 68% of those in the nonfinancial sector.

Of the amount scheduled to mature by year-end 2017, approximately $50 billion is due in 2013, about $67 billion is due in 2014, $93 billion is due in 2015, $79 billion is due in 2016, and $106 billion is due in 2017.

"In the emerging markets, we believe that new debt issuance will likely satisfy companies' refinancing needs, based on the strong issuance trends in the region, the presence of ample liquidity from investors looking to diversify their portfolios, and the positive rating trends," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research.

"We determine rating trends by looking at negative bias over time for companies most at risk of downgrade."

We define negative bias as the number of issuers with negative rating outlooks or ratings on CreditWatch with negative implications divided by the total number of issuers.

A recent downgrade, especially from an investment-grade rating to a speculative-grade rating may increase funding risks for the companies looking to refinance their debt.

During the past few months, negative bias declined in the emerging markets to 19% as of April 30, 2013. By contrast, negative bias spiked in the region during the recent financial crisis, and it reached 40% in mid-2009.

"Although these factors are favorable for upcoming maturities in the emerging markets, we remain cautious because unprecedented sociopolitical events or contagion from a depressed global economy would pose risks that can create hurdles for companies facing large maturities," said Ms. Vazza. "In such a scenario, lower rated companies with weak credit profiles would face difficulties in raising capital on favorable terms." 

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