Asian corporate refunding 'manageable through 2016'

Asian non-financial companies outside Japan are expected to demand refunding of US$314 billion (Bt9.36 trillion) through 2016, but these amounts are manageable, according to Moody's Investors Service.

"The markets should be able to absorb these maturities as long as no significant market disruptions occur," Ping Luo, a vice president and senior analyst, said in a statement released by the Hong Kong office yesterday. The refunding amounts are reasonable "given the strong issuance levels in recent years, and because the maturities are dominated by investment-grade and domestic bonds", he said.

Moody's report covers bond maturities over a four-year period and includes the maturities of more than 3,000 non-financial corporate bonds issued by 237 companies. The data were as of December 31.

The report showed that during the period, $92 billion of rated corporate debt issues in Asia, raised in domestic and foreign markets, would mature next year. That is higher than $78 billion this year. The amount will decline to $63 billion by 2016.

Between 2009 and last year, these issuers raised $498 billion or an annual average of $124 billion. The Asian bond market proved particularly strong last year with investment-grade issuance reaching a record high of $162 billion, up 52 per cent from $107 billion in 2011. Chinese companies were largely responsible for the jump.

"We are less concerned about the refinancing of domestic bonds than cross-border ones as Asian companies in general have better access to domestic capital markets, which are relatively stable," Luo said.

Domestic bonds dominate, accounting for 66 per cent of the maturities due through 2016.

About 88 per cent of the debt maturing through 2016 comes from investment-grade issuers, which have good access to various funding sources.

Looking at the breakdown of debt by country, most comes from South Korea and China, with both countries accounting for 77 per cent of the refinancing needs in Asia.

China has been increasingly active in bond issuance, becoming the largest issuer country in Asia last year.

Ten companies account for 47 per cent of the expected total refunding needs of the next four years.

Five are Korean companies, of which four are government-related issuers, all rated "A1" with stable outlooks, and finally Posco at "Baa1" with a negative outlook.

The other five are China National Petroleum Corporation ("Aa3" positive), which has the largest outstanding bonds at nearly $38 billion, both domestic and cross-border, China Petrochemical Corp ("Aa3" stable), Hutchison Whampoa ("A3" negative), China Three Gorges Corp ("A1" stable) and China Metallurgical Group Corp ("Baa3" review for downgrade).

All 10 issuers continue to demonstrate strong access to onshore or offshore funding.

"Furthermore, high-yield cross-border bonds due in 2013 are just $2.2 billion, an amount that is small considering the context of the region's annual high-yield cross-border issuance average of $12 billion for 2009-12," Luo said.

"And the maturity amounts also represent just 3 per cent of the region's total refinancing needs for 2013, while a variety of funding sources are increasingly available to high-yield issuers, particularly those in China, where onshore fundraising options are becoming more diverse and accessible."