Just what the shaky bond markets needed: about 8 percent of U.S. corporate debt is expected to be refinanced in 2008, according to a new report from Standard & Poor’s. The reissuers will be seeking investors at a time when new debt issues are at an all-time high and some potential buyers are still concerned about the aftershocks from the subprime-mortgage crisis.
According to S&P, potentially $47.9 billion in corporate debt will be refunded in the last quarter of 2007, and as much as $251 billion next year. S&P says its universe of rated corporate debt is $2.96 trillion.
Breaking down the data, S&P expects $31.4 billion in investment-grade maturities for the fourth quarter of 2007, and $206 billion in 2008. In the high-yield category, $4.7 billion will mature during the remainder of this year, and $36.4 billion next year. S&P anticipates $11.7 billion in investment-grade and junk debt to be called in 2007, and as much as $7.8 billion in 2008, though it warns that in the event of another market disruption such as the subprime crisis, call volume would drop markedly.
The rating agency notes that its estimates are based on maturity schedules for all U.S. fixed and floating corporate bonds that it rates, as well as on its call forecast, which uses only plain vanilla fixed-rate corporate bonds rated BB- or higher.
Companies seeking to refund these large amounts must compete with an overflowing calendar of new issues. In the first three quarters of this year, $855 billion in U.S. corporate bonds were issued, versus $705 billion in the same period in 2006 and $551 billion in 2005. Of the $855 billion in new issuance, $751 billion was of investment grade, while $104 billion was of speculative grade.