Asian borrowers face a daunting $314 billion debt repayment as rates rise
Asian borrowers face a daunting $314 billion debt repayment as rates rise
Asian companies with large debt levels will face an uncomfortable truth this year when $314 billion of bonds come due for repayment at a time when refinancing prices for lower-rated corporations are approaching historic highs, reported Bloomberg.
Companies ranging from India's Vedanta Resources Ltd. to financially troubled real estate developers like China's Evergrande Group have US-currency debt due in 2023, according to data compiled by Bloomberg.
This is the largest repayment batch due in the next five years.
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Rising borrowing costs could make it difficult for businesses with weaker credit ratings to raise money to pay off debt.
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According to data by Bloomberg, financing costs for dollar bonds with junk ratings reached their pinnacle in Asia in 2022, though they have since fallen below that level.
Moody's Investors Service has warned that speculative-grade corporate defaults could quadruple globally this year in a worst-case scenario.
China's real estate developers had a record number of defaults in 2022. South Korea's credit crisis demonstrated how rapidly local debt problems that arise outside of a country's financial core might spread to the wider market.
Globally, corporate note spreads, or the difference between the yield on a corporate bond and a government bond, has shrunk significantly in recent weeks on predictions that rate rises will pause.
And while there are some indications that the worst for bond markets may be over, uncertainty still persists.
"Market liquidity and appetite for refinancing will be the key challenges in 2023," Jim Veneau, head of Asian fixed income at AXA Investment Managers Asia Ltd. in Hong Kong, told Bloomberg.
China's various efforts to support economic growth aren't a "cure-all", but primary bond market activity should pick up due to numerous and targeted property policies and the end of Covid Zero, he added.
(With inputs from agencies)
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