According to a recent report by Moody's, US speculative grade companies face more than $800bn in refinancing requirements over the next 5 years including $555bn in bank facilities and $250bn in bonds. Of the $800bn, around $100bn in debt matures in 2010-11 and more than $700bn will mature in 2012-14. The refunding needs for 2010-2012 are up by more than one-third from the 2009-2011 period to $255 billion-the biggest three-year amount in the history of Moody's 12-year-old study. The enormous amount of debt due over the next five years(Moody's report covers 2500 companies) stems from a robust period of refinancing and leveraged buy-out activity prior to summer 2007. Although refinancing risk has recently eased given the reopening of the high yield market, the success of any future refinancing will depend on the risk appetite of lenders and a sustained pace of recovery in the global and particularly the US economy.
Click on chart, courtesy of BNP Paribas.
Credit clowns are usually late in the game. Nonetheless, get ready for whatever side of the trade! Bond vigilantes are invited to the deficit cosmetics show. However, in the worst case, Fed still has the room on the balance sheet, as there are no limits.