Bloomberg News

Junk Companies to Refinance Half Bonds by 2015, Moody’s Says

October 25, 2011

Oct. 26 (Bloomberg) -- Junk-rated companies in Europe must refinance more than half of their outstanding debt in the next four years, leaving them vulnerable should the region’s crisis drag on, according to Moody’s Investors Service.

Borrowers in Europe, the Middle East and Africa have $325 billion of their $601 billion of bonds coming due by 2015, Moody’s said in a report dated today. The amount maturing in the next four years has risen by $10 billion since 2010, while total debt surged $99 billion, according to the report.

Sales of junk, or high-yield, bonds slumped in Europe as the sovereign woes that forced Greece, Ireland and Portugal to seek international bailouts hurt the riskiest companies. Issuance has fallen to $11.4 billion so far in the second half, down from $56.1 billion in the first six months of the year, according to data compiled by Bloomberg.

“If the sovereign picture worsens, given that a limited number of only higher-rated credits have recently accessed the market, that would increase our concerns over high-yield bond market access, especially for lower-rated companies,” Douglas Crawford, an analyst at Moody’s in London, said in an interview yesterday.

Issuance has been restricted to a few well-known, higher- rated companies including Fresenius Medical Care AG and building materials supplier HeidelbergCement AG, both of which are rated Ba1, Moody’s top junk grade.

Junk, or speculative-grade, debt is rated lower than Baa3 by Moody’s and BBB- by Standard & Poor’s.

Issuers have to refinance 54 percent of their total debt in the next four years, down from 63 percent last year, according to Moody’s.

--Editors: Paul Armstrong, Michael Shanahan

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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