HONG KONG Credit conditions for Asia-Pacific borrowers could become less favorable in the coming years, raising refinancing risk as weak commodities and slow growth take their toll against the backdrop of a strong dollar, rating agency Standard & Poor’s warned.
That could mean higher funding costs and less credit available to fund corporate growth, especially for companies with weaker credit ratings, S&P said on Wednesday.
Asian bond issuance has boomed since the global financial crisis, as a combination of soft monetary conditions and yield-seeking bond investors enabled borrowers in the region to raise debt easily.
Three straight record years saw issuance peak at $210.1 billion in 2014 before dipping to $182.9 billion in 2015 in Asia ex-Japan market for bonds issued in G3 currencies, according to Thomson Reuters data.
S&P said investment-grade debt issuance declined by 11 percent in 2015 and junk-rated offerings were down by 43 percent.
But it said that if borrowers chose to refinance all the rated corporate debt that matures in the next five years with bonds, average issuance would need to increase by $5 billion annually to meet scheduled maturities.
Of the $961.4 billion of S&P-rated debt maturing in 2016-2020, $191.3 billion was due in 2016 and $219.5 billion was due in 2017, with the remaining $550.6 billion maturing in later years, it said.
The strong dollar could also pose a refinancing risk to borrowers, with 77 percent of Asia-Pacific issuance in the past three years in dollars or euro. As a result, about 68 percent of the debt maturing in 2016-2020 was dollar- or euro-denominated.
Currencies in the region have suffered major losses in 2015 versus the dollar, with the Malaysian ringgit MYR= and the Indonesian rupiah IDR= leading the declines.
(Reporting by Umesh Desai- Editing by Eric Meijer)
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