FAQ: Global Corporate Issuers Face $8.

9 Trillion In Rated Debt Maturities Through Year-End 2018

Global Fixed Income Research: Diane Vazza, Managing Director, New York (1) 212-438-2760; diane.vazza@standardandpoors.com Jacinto D Torres, Senior Director, New York (1) 212-438-3243; jacinto.torres@standardandpoors.com

Table Of Contents
Frequently Asked Questions Related Research

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FAQ: Global Corporate Issuers Face $8.9 Trillion In Rated Debt Maturities Through Year-End 2018
Standard & Poor's Global Fixed Income Research recently conducted a study to analyze corporate maturities over the next few years. It is important to understand corporate refinancing needs vis--vis the overall expectations in the global economy and the credit markets. The following are some of the questions we addressed. (Watch the related CreditMatters TV segment titled, "Europe Owns The Largest Chunk Of $9 Trillion In Global Refinancing," dated March 14, 2014.)

Frequently Asked Questions

How much debt do we expect to come due during the next few years?
We estimate that about $8.9 trillion in corporate rated debt is scheduled to mature between 2014 and 2018 (see table 1), about $1.6 trillion of which is due in 2014. We believe that a portion of the 2014 maturities have already been refinanced, given the robust new issuance activity in recent quarters. Approximately $1.8 trillion is due in 2015, $1.9 trillion in 2016, and about $1.8 trillion in both 2017 and 2018. Of the total due to mature through 2018, financial companies account for slightly less than half of the total, and about 79%, or nearly $7 trillion, is investment-grade (rated 'BBB-' and higher).
Table 1

Global Schedule For Maturing Corporate Debt

(bil. $) U.S. Nonfinancials Investment-grade Speculative-grade Financials Investment-grade Speculative-grade Total U.S. Europe Nonfinancials Investment-grade Speculative-grade Financials Investment-grade Speculative-grade Total Europe Other developed Nonfinancials Investment-grade 81 71 66 60 61 340 535 38 866 586 28 909 479 31 863 408 19 754 307 9 678 2,315 125 4,070 236 57 251 44 264 88 222 104 222 140 1,196 433 203 11 498 231 17 594 220 14 724 201 39 781 181 24 885 1,037 105 3,483 173 110 227 120 302 188 276 266 318 361 1,296 1,045 2014 2015 2016 2017 2018 Total

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FAQ: Global Corporate Issuers Face $8.9 Trillion In Rated Debt Maturities Through Year-End 2018

Table 1

Global Schedule For Maturing Corporate Debt (cont.)

Speculative-grade Financials Investment-grade Speculative-grade Total other developed Emerging markets Nonfinancials Investment-grade Speculative-grade Financials Investment-grade Speculative-grade Total emerging markets Totals Total investment-grade Total speculative-grade Total nonfinancials Total financials Grand total 1,384 238 697 925 1,622 1,540 234 762 1,012 1,774 1,517 359 978 897 1,876 1,298 476 1,001 773 1,773 1,216 597 1,194 619 1,813 6,955 1,903 4,631 4,226 8,858 11 2 42 22 1 60 24 5 77 24 3 80 20 5 80 100 16 339 21 8 24 12 37 11 28 25 34 22 144 78 124 0 216 127 0 211 124 211 79 159 72 169 527 0 966 11 12 21 20 36 99

Data as of Dec. 31, 2013. Includes bonds, loans, and revolving credit facilities. Estimates are likely biased on the high side because our tallies do not always take into account amortization schedules and loan paydowns. Additionally, revolving credit facilities are usually tallied at full value whether or not they are fully drawn. Foreign currencies are converted to U.S. dollars at the exchange rate on close of business on Dec. 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Our data only covers the debt from entities that Standard & Poor's Ratings Services rates. Additional debt is maturing outside of our rated population, particularly in regions where capital markets are less developed.

Which regions have the most maturing debt?

Entities domiciled in Europe account for about 46% of the $8.9 trillion total. U.S.-based entities account for about 39%, while those based in the other developed countries (Australia, Canada, Japan, and New Zealand) account for about 11%. Entities based in the emerging markets, which have less developed credit markets, account for about 3.8%. The breakdown varies by region. For example, financial companies account for only about 33% of corporate debt in the U.S. but represent 60% of the total in Europe. Moreover, in the U.S., where the leveraged debt market is more developed, speculative-grade debt (those rated 'BB-' and lower) accounts for 33% of the total maturing through 2018. In Europe, where a significant portion of speculative-grade issuance is not publicly rated, speculative-grade debt represents only 14% of the total due by 2018.

What is the breakdown of maturing debt by rating?

Nearly $7 trillion (79%) of the $8.9 trillion is investment-grade, and $1.9 trillion is speculative-grade (see chart 1). Overall, a large portion of debt outstanding (about 32% of the total) is in the 'A' rating category, and 25% is in the 'BBB' rating category. Debt in the lowest rating categories--'B' and 'CCC' and lower--totals about $890 billion. Refunding risk is greatest among companies that issue debt at the lower ratings. These companies are usually smaller and less

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FAQ: Global Corporate Issuers Face $8.9 Trillion In Rated Debt Maturities Through Year-End 2018

diversified than their higher-rated counterparts, and they borrow at higher costs and have fewer alternative funding sources.
Chart 1

What is the breakdown of maturing debt by sector?

The nonfinancial sector accounts for about $4.6 trillion of debt through 2018. Capital-intensive sectors such as automotive, telecommunications, and utilities have significant debt, with more than $400 billion each. The consumer products, health care, and media and entertainment sectors account for $399 billion, $377 billion, and $346 billion, respectively (see table 2).
Table 2

Maturing Debt By Major Nonfinancial Sectors

(bil. $) Aerospace and defense Automotive Capital goods Chemicals, packaging and environmental services Consumer products Diversified 2014 3 78 46 25 55 3 2015 4 97 37 31 75 3 2016 11 88 39 34 82 4 2017 10 89 47 37 86 4 2018 14 72 51 62 102 4 Total 42 425 220 189 399 18

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FAQ: Global Corporate Issuers Face $8.9 Trillion In Rated Debt Maturities Through Year-End 2018

Table 2

Maturing Debt By Major Nonfinancial Sectors (cont.)

Finance co. Forest products and building materials Health care High technology Homebuilders/real estate co. Integrated oil and gas Media and entertainment Metals, mining and steel Oil and gas exploration and production Retail/restaurants Telecommunications Transportation Utility Total 6 18 49 51 13 20 49 28 33 22 88 23 87 697 3 19 48 39 20 45 38 41 43 27 85 27 82 762 3 29 83 59 26 27 76 42 60 50 140 45 79 978 2 30 85 64 24 37 65 38 84 49 135 41 75 1,001 4 42 112 88 28 40 118 58 78 51 133 44 91 1,194 18 137 377 300 111 169 346 207 297 199 580 180 415 4,631

Data as of Dec. 31, 2013. Includes bonds, loans, and revolving credit facilities. Estimates are likely biased on the high side because our tallies do not always take into account amortization schedules and loan paydowns. Additionally, revolving credit facilities are usually tallied at full value whether or not they are fully drawn. Foreign currencies are converted to U.S. dollars at the exchange rate on close of business on Dec. 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Financial companies, including banks and insurance companies, account for $4.2 trillion of the $8.9 trillion total. Among financial issuers, those in the U.S. have the most debt coming due at $1.1 trillion. Financial companies from France, Spain, and the U.K. also have significant amounts of maturing debt (see chart 2). European banks are of particular interest, not only because the sector continues to face some headwinds that complicate their own capital raising efforts, but also because the European Central Bank's (ECB's) Asset Quality Review scheduled for later this year could hinder them from otherwise increasing loans to other companies.

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FAQ: Global Corporate Issuers Face $8.9 Trillion In Rated Debt Maturities Through Year-End 2018

Chart 2

How has the recent boom of refinancings altered risk in the credit markets?
Generally, the recent wave of refinancings and prefinancings have helped some companies push maturities out and lower debt service costs, given the relatively favorable terms on offer. This has helped some companies manage their risks amid the still elevated uncertainty throughout much of the world since the global financial crisis. However, many investors remain hesitant to commit to longer-term exposure. This is evident in the current pool of debt instruments in our database, where more than 80% of outstanding debt that were issued in vintage years 2012 and 2013, mature by 2020. Among speculative-grade debt, shorter duration instruments are even more prevalent, which is not surprising. The willingness of investors to provide funding has certainly helped keep defaults from being more frequent, but the shorter duration commitments shift the refinancing risk only a few years out.

What are some of the risks related to corporate refinancing in the near term?
A possible shift from accommodative to tighter monetary policy could blunt the flow of new corporate bond issuance, which was robust in 2012 and 2013. So far, it appears investors have been relatively comfortable with the measured pace of the decline in the U.S. Federal Reserve's asset purchases. However, we expect the Fed to eventually move away from asset purchases and start to raise the benchmark Fed funds rate sometime in 2015, and it is difficult to gauge how investors, domestically and globally, will react. In Europe, the weak recovery will likely keep interest rates low longer than in the U.S., but the fragile economies in the region might keep some investors at bay. Moreover, we

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expect unemployment in the region to remain high, which may keep consumers from otherwise spending more freely, and therefore possibly limiting revenue upside for some companies. In the emerging markets, where a significant portion of maturing debt is in U.S. dollars and euros, the recent foreign exchange volatility is a real risk, not only as it relates to the burden it adds on current debt service, but also to the feasibility of meeting the higher costs associated with future capital raising efforts. This is less of a risk for export-oriented multinational firms with effective foreign exchange hedges in place and revenue streams in U.S. dollars and euros. However, for smaller, less diversified firms with less financial flexibility, who usually carry lower ratings, a local currency exchange rate devaluation may pose a significant threat in their ability to meet current and future financing needs. To the extent of the uncertainty that they breed, socio- and geopolitical risks are factors that could materially affect refinancing prospects. The current situation in Ukraine, for instance, is delicate, and investor concerns stemming from this development could impede financing and refinancing plans for some companies. As one would expect, entities at the lower end of the ratings spectrum, relative to higher-rated borrowers, typically bear the brunt when investor confidence begins to erode.

Related Research
U.S. Refinancing Study: $3.5 Trillion In Corporate Debt To Mature By Year-End 2018, Feb. 28, 2014 Default, Transition, and Recovery: The U.S. Corporate Default Rate Is Expected To Remain Subdued, Rising Modestly To 2.5% By December 2014, Feb. 26, 2014 Credit Trends: Global Corporate Bond Issuance Is Off To A Good Start In 2014 With $296 Billion Issued In January, Feb. 6, 2014

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