Canadian firms’ refinancing needs are growing

first_img When bond ratings slip, investors shrug Catastrophe bond market gains momentum “The increase in Canadian firms’ refunding needs was driven by a 13% rise in speculative-grade bank and bond maturities between 2017 and 2021, to $57 billion,” says Tiina Siilaberg, vice president and senior analyst at Moody’s, a statement. “In contrast, investment-grade bond maturities fell by 12% during that period, to $35 billion,” adds Anastasija Johnson, a Moody’s analyst in a statement. The report notes that speculative-grade debt now represents more than 60% of total debt due in 2017-21, and it attributes this shift to speculative-grade debt to “the numerous rating downgrades among commodities issuers in the past two years due to the oil price slump.” Moody’s expects the Canadian high-yield market to normalize as the economy and commodities prices continue to improve, with credit risks at energy firms declining and some improvement in their ratings. In the meantime, the credit-rating agency says that near-term refunding risk is low. “Only $6 billion of Canadian companies’ debt comes due this year, as refunding needs have shifted forward to 2018,” the Moody’s report states. “The amount of debt maturing next year now stands at $17 billion, or 18% of the total, and is almost equally split between speculative- and investment-grade.” In a separate report on the U.S., Moody’s says that an all-time record of US$2 trillion in corporate debt will be coming due in the next five years. More than US$1 trillion of that is in speculative-grade corporations. “Five-year speculative-grade refunding needs have reached a new high, breaking the US$1 trillion mark,” says Siilaberg. “U.S. spec-grade non-financial companies have a total of US$1.06 trillion of debt maturing between 2017 and 2021, with US$933 billion, or nearly 90%, of this due in 2019-21.” Of these speculative-grade companies, almost 60% have stable ratings outlooks, 24% have positive outlooks and 16% have negative outlooks, Moody’s reports. At the same time, investment-grade U.S. companies have a record amount of debt (approximately US$944 billion) due over the next five years. Says Siilaberg: “For the majority of U.S. investment-grade companies, refunding risk over the next five years is manageable.” Share this article and your comments with peers on social media With bond yields low and rising, what is the price of safety? James Langton center_img Although Canadian companies’ refinancing needs continue to rise, refinancing risk remains low in the short term, says a new report from Moody’s Investors Service Inc. The credit-rating agency reports that Canadian non-financial companies have about $92 billion of rated debt maturing from 2017 to 2021, which is the highest total since 2009, and is up by 2% from the previous five-year period. Moody’s reports that $27 billion of this debt load is rated “speculative grade” and comes due in 2021. Related news Facebook LinkedIn Twitter Keywords Bond last_img read more