$2.1 trillion due in the next two years. The vig spread on corporate debt 10 times wider than a year ago. The good news is supposedly that 72 per cent of the debt is owed by financial companies, and they’re getting bailed out.
Reuters reports: About $2.1 trillion of European company and bank debt matures in the next three years, raising “substantial refinancing risk,” Standard & Poor’s said Tuesday.
With new bond issues at a near standstill after the bankruptcy filing by Lehman Brothers in September, fears have risen that companies will be unable to raise money to pay off maturing bonds. That could push them into default.
“Funding pressures in Europe have escalated sharply since September as stress in the global financial system accelerated,” S&P analysts said in a note. “Given the soaring cost of capital, the sizeable pipeline of debt coming due suggests substantial refinancing risk.”
S&P said euro-denominated senior bank debt was being offered at spreads near 2.25 percentage points over swaps, almost 10 times wider than levels before August 2007. The financial sector makes up 72 per cent of the maturing debt over the next three years that is rated by S&P, but recent government rescue packages should help mitigate those refinancing pressures, S&P said.
In the remainder of this year, $206 billion of European debt will mature, including $181 billion in the financial sector.
Within nonfinancials, capital-intensive sectors like telecommunications and utilities have around $113 billion and $79 billion worth of debt, respectively, due to mature in 2009 through to the end of 2011, S&P said. In the fourth quarter, those sectors face an additional $8.6 billion and $4.1 billion respectively of maturing debt. Other sectors with the heaviest redemption profiles include health care at $48 billion; metals, mining and steel at $32 billion; and transportation at $28 billion.
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