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Debt market

Corporate borrowers to issue $6.6tn in bonds in next 5 years: S&P

Booming construction that will prompt more debt financing. /Reuters

Booming construction that will prompt more debt financing. /Reuters

Non-financial corporate borrowers in Asia, Europe, Latin America, and North America will seek up to US$21.7 trillion in debt financing to support growth over the five years to 2018, according to a new report by Standard & Poor's Ratings Services.

Of total, $6.6 trillion will be new bonds and other debt securities.

The report, titled "Credit Shift: Standard & Poor’s Expects $6.6 Trillion In New Corporate Bond Issuance Over The Next Five Years", elaborates on the corporate funding needs in the major geographic regions, and provides an appendix explaining our key assumptions for both articles.

Corporate borrowers have tapped the debt markets to such an extent because of yield-seeking investor demand contributing to lucrative credit terms, combined with constrained bank loan supply.

As the recovery in the US continues to gain momentum, S&P estimates that US non-financial corporate borrowers will need to raise new bonds of $2.5 trillion out of total debt demand of $13 trillion to $14 trillion.

Meanwhile, Europe’s corporate borrowers will seek $1.5 trillion of new bonds out of $11.6 trillion to $12 trillion in financing.

"The equity challenge facing eurozone banks, low capital markets funding costs, and the desire to diversify funding sources encourages further bank disintermediation," said Standard & Poor’s credit analyst Paul Watters.

Amid China’s economic expansion, though lower than before, nonfinancial corporate borrowers could seek $1.3 trillion of new bonds out of $18 trillion to $20 trillion in financing.

For the rest of the Asia-Pacific region, it estimates bond issuance of $0.9 trillion out of a total of $10 trillion to $11 trillion.

For Brazil and Mexico, it expects nearly $0.2 trillion in new bond demand out of funding requirements of $1.2 trillion to $1.3 trillion for the period 2014-2018.

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