Asian Corporate Refunding Needs Manageable Through 2016, Says Moody's

The refunding needs of Asian non-financial corporates (excluding Japan) for domestic and cross-border bonds due through 2016 are manageable, given strong issuance of US$498 billion during 2009-2012, or an annual average of US$124 billion, according to Moody's Investors Service.


In total, rated non-financial corporate debt issuers in Asia have US$314 billion of domestic and cross-border bonds due through 2016. During this period, annual maturities will peak at US$92 billion in 2014, up from US$78 billion in 2013, and then decline to US$63 billion by 2016.


"These maturity amounts are manageable, given the strong issuance levels in recent years, and because the maturities are dominated by investment grade and domestic bonds," says Ping Luo, a Moody's Vice President and Senior Analyst.


In fact, the Asian bond market proved particularly strong in 2012 with investment-grade issuance reaching a record high of US$162 billion, up 52% from US$107 billion in 2011. Greater issuance by Chinese companies was largely responsible for the jump.


"The markets should be able to absorb these maturities as long as no significant market disruptions occur," says Luo, adding, "We are less concerned about the refinancing of domestic bonds than cross-border ones as Asian companies in general have better access to domestic capital markets, which are relatively stable."


According to the "Asian Corporates' Refunding Needs Remain Manageable Through 2016" report, domestic bonds dominate with some 66% of the maturities due through 2016 being domestic bonds.


Additionally, the report states that around 88% of the debt maturing through 2016 comes from investment-grade issuers, which have good access to various funding sources.


Looking at the breakdown of debt by country, the majority comes from Korea and China, with issuers in both countries accounting for roughly 77% of the total refinancing needs in Asia. Moody's notes that China has been increasingly active in bond issuance, becoming the largest issuer country in Asia in 2012.


A total of 10 companies account for 47% of the expected total refunding needs of the next four years.


Of this 10, five are Korean companies, breaking down into four government-related issuers, all rated A1 with stable outlooks, and finally POSCO at Baa1 with a negative outlook.


The other five are China National Petroleum Corporation (Aa3 positive), which has the largest amount of outstanding bonds at nearly USD38 billion, both domestic and cross-border, China Petrochemical Corporation (Aa3 stable), Hutchison Whampoa (A3 negative), China Three Gorges Corporation (A1 stable), and China Metallurgical Group Corporation (Baa3 review for downgrade).


All 10 issuers continue to demonstrate strong access to onshore or offshore funding.


"Furthermore, high-yield cross-border bonds due in 2013 are just US$2.2 billion, an amount which is small when considered in the context of the region's annual high-yield cross-border issuance average of US$12 billion for 2009-2012," says Luo.


"And the maturity amounts also represent just 3% of the region's total refinancing needs for 2013, while a variety of funding sources are increasingly available to high-yield issuers, particularly those in China, where onshore fundraising options are becoming more diverse and accessible," adds Luo.


This special comment is Moody's third annual report analyzing the refunding needs of rated non-financial corporates in the Asia Pacific (excluding Japan) corporate bond market. The study covers bond maturities over a four-year period and includes the maturities of over 3,000 non-financial corporate bonds issued by 237 companies. The data was sourced as of 31 December 2012.


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