B-rated firms may struggle to refinance-S&P

NEW YORK, Oct 27 (BestGrowthStock) – Some high yield companies may
struggle to refinance debt that comes due in 2013 and 2014,
though most debt issuers should be able to refinance the
approximately $3 trillion in debt that will mature in the
coming five years, Standard & Poor’s said on Wednesday.

Around 35 percent, or $1.1 trillion, of debt from high
yield borrowers will come due over the coming five years and
about $390 billion will mature in 2013 and 2014 from companies
rated in the B or CCC ratings bands, S&P said in a report.

This debt is “the weak spot in terms of refinancing risk,”
S&P said.

The B rating is five steps below investment grade and
represents a higher risk that a company will be unable to repay
its bonds, while CCC ratings reflect investments that are
highly speculative.

The main risk in refinancing lower-rated debt due in 2013
and 2014 is that collateralized loan obligations, which have in
recent years provided most demand for bank loans, will no
longer be reinvesting, and few new deals are being created, S&P
said.

Some new loan investors are likely to partially fill the
void and companies with solid business prospects will be able
to handle maturing debt through equity issuance, acquisitions
by stronger firms, bond sales and loan paydowns, the rating
agency said.

“Nevertheless, we expect companies with weak balance sheets
that have deteriorating operating fundamentals or are on the
losing end of a technological or structural shift in their
industry could be forced to cut debt through exchanges or
bankruptcy,” it said.

S&P expects the default rate to increase modestly in 2013
and 2014 to reflect this risk, but said defaults are unlikely
to jump to recession levels unless the economy declines.

(Reporting by Karen Brettell; Editing by Andrew Hay)

B-rated firms may struggle to refinance-S&P