Funding needs of non-financial companies in the U.S., euro region, U.K., China and Japan will total $43 trillion to $46 trillion over the next five years, Standard & Poor’s said in a report.
This includes $30 trillion of debt to be refinanced and $13 trillion to $16 trillion of new money needed to spur growth, the ratings company said.
“This global wall of non-financial corporate debt will potentially compound the credit rationing that may occur as banks seek to restructure their balance sheets, and bond and equity investors reassess their risk-return thresholds,” Jayan Dhru, senior managing director of global corporate ratings at S&P in New York, said in the report.
“Combined with the euro-zone crisis, the slow U.S. economic recovery and the prospect of a slowing economy in China, this raises the downside risk of a perfect storm in global corporate credit markets,” Dhru said.
Companies around the world sold $1.5 trillion of bonds this year, about the same as was issued in the same period of 2011, according to data compiled by Bloomberg. Loans fell 18 percent to $740.1 billion as the global financial crisis prompted banks to pull back on lending.
S&P said it expects banks and capital markets “will largely be able to continue to provide” most of the cash companies need, though “downside risk remains” and the funding situation remains “very fragile.”
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