High Yield Debt Faces Greater Refinancing Risk in H2

A total of $165 billion of US speculative-grade rated corporate bonds and bank debt is coming due over the next three years, Moody’s Investors Service said in its new annual study detailing refunding risk. Moody’s pointed to the second half of 2003 as a period of high activity and therefore possible risk, when $28 billion in debt faces refinancing versus only $17 billion in the first half of the year. At $100 billion, bank debt is the majority of the debt to be refinanced through 2005, mitigating risk somewhat as most is in the Ba grade, which is the higher end of the high yield spectrum. However, in the second half of 2003, $4.7 billion of the $28 billion coming due is rated below Ba3, Moody’s says, compared to $2.6 billion of below Ba3 debt coming due in the first half of the year. ‘Essentially, the second half of the year will be a larger challenge for refinancing given the risk that continued economic uncertainty will drive a flight to quality among investors,’ said Moody’s Vice President/Senior Analyst Paul Aran.


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