Asia Pacific Companies Can Refinance Debt Through to 2017, Says Moody's

Moody's Investors Service says that most Asia Pacific (excluding Japan) non-financial corporate debt issuers can successfully refinance the total $378 billion of domestic and cross-border bonds maturing over the next four years, given the ability and willingness of investors to lend to them.


"Approximately 88% of bonds that we rate maturing between now and 2017 is for investment-grade firms. These companies typically have access to a variety of funding sources, including the domestic and international capital markets. We therefore do not expect such firms to have difficulty refinancing their debt," says Joe Morrison, a Moody's Vice President and Senior Analyst.


"In addition, about 66% of the maturities represent domestic bonds. Asian companies generally have better access to the more stable domestic capital markets than to cross-border markets. For this reason, we believe that refinancing in the domestic markets will be more assured than in the US dollar market," adds Morrison.


A Moody's report points out that the corporate issuers' four-year maturities to 2017 have increased by 20% from last year's $314 billion. Moreover, annual maturities will peak at $108 billion in 2014 and fall thereafter, averaging $85 billion a year between 2015 and 2017.


According to Moody's report, Chinese and Korean corporate debt issuers account for roughly 80% of the region's total bond maturities through 2017.


"China accounts for 45% of the debt coming due in Asia over the next four years. Of that, 76% was issued domestically, and 97% of these domestically issued bonds were by investment-grade companies, nearly all of them state-owned," says Morrison.


Moody's report says the strong issuance by Chinese companies comes as the domestic corporate bond market develops and as firms in China continue to tap offshore funds because of low interest rates on US dollar borrowing, expectations for continued RMB appreciation, diversification of investor base and bond currency, rising capital needs for their overseas acquisitions and expansions, and strong investor demand for Chinese corporate bonds.


"Korea accounts for 35% of total Asian maturities through 2017. Of this percentage, investment-grade companies account for almost all or 99%, and domestic bonds represent 72% of total maturities. Korean companies rely heavily on their established domestic bond market, to which they have ready access," adds Morrison.


On high-yield debt issuers, Moody's report says the average annual foreign currency maturities of $8 billion ($6 billion from China) over the next four years, are small in relation to the total high-yield issuance of $23 billion ($16 billion from China) for the first nine months of 2013 and lower than the annual totals for each of the previous four years.


Moody's report also says the 10 companies with the largest amounts (totaling 47%) of outstanding debt through to 2017, are investment-grade firms. Nine -- four from China and five from South Korea -- are government-related issuers. These firms sit at the upper end of Moody's investment-grade rating scale and continue to demonstrate access to onshore and offshore funding.


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