Moody's: Asian Corporate Refunding Risk is Manageable

Taipei, March 25, 2011 (CENS)--Moody's Investors Service recently noted in a new report that the near-term refunding needs for both investment- and speculative-grade, non-financial corporations in Asia (excluding Japan and Australasia) are manageable.

"We estimate that the refunding needs for Asian corporations over the next five years will come to US$234 billion, two-thirds of which are for domestic bonds. Annual maturities will be pretty evenly distributed at US$42 billion to US$50 billion each year," said Elizabeth Allen, a Moody's vice president/senior credit officer and author of the report.

These amounts are manageable, compared to the average annual new issuance of US$58 billion during the last five years and the more recent issuance of US$95 billion in 2009 and US$93 billion in 2010.

"In our view, barring any significant disruptions, the markets can easily absorb these maturities, 85% of which are for investment-grade corporations, whose refunding risk has improved because of strong balance sheet liquidity and steady financial performance," Allen said.

"Indeed, many Asian corporations are already refinancing their debt, before maturity, because of low interest rates and strong market demand, as investment-grade rated companies take advantage of current conditions to issue long-dated instruments," she added.

In addition, market-specific refunding risk has diminished, because of the steady economic environment, stable industry outlooks, growing interest in Asian bonds by foreign investors, and the mostly uninterrupted availability of funds from the domestic banks and capital markets.

"The recent monetary tightening in some Asian countries will result in slightly higher funding costs, but we don't expect investment-grade companies to have problems refinancing their debt," Allen said, adding "Our confidence in their ability to do so stems partly from the fact that a large portion of the refunding need comes from government-related issuers."