Nov. 11 (Bloomberg) -- Companies in Europe face ``substantial refinancing risk'' as a total $2.1 trillion of debt matures though 2011, according to a Standard & Poor's report.

Ninety percent of the total coming due is investment-grade bonds and loans, with 72 percent issued by financial firms, S&P said in the report published today. Outside of financial services, telecommunications companies have $121 billion of debt maturing and utilities must repay $79 billion.

The investment-grade status of the debt maturing ``traditionally would temper refunding risk,'' S&P analysts led by Diane Vazza wrote in the report. The current environment poses ``greater challenges than normal,'' because of ``the exceptional instability experienced in recent weeks, as well as investors' pullback from even highly rated securities.''

Writedowns and credit losses by banks worldwide since the start of 2007 have caused markets to seize up as lenders hoard capital. The extra yield investors demand to buy investment-grade bonds rather than government debt has soared to 395 basis points, an eightfold increase from two years ago, Merrill Lynch & Co. indexes show.

Investment-grade debt is rated at least BBB- by S&P and Baa3 by Moody's Investors Service.

S&P's study is based on 15,022 bonds and loans issued by companies in Europe, the Middle East and Africa rated by the New York-based firm, and accounts for $4.5 trillion of outstanding debt. The report doesn't cover preferred stock and structured securities, S&P said.

Devi Aurora, Jacinto Torres and Cameron Miller helped Vazza write the report. All are based in New York.

Germany, Sweden

About $206 billion matures in the final quarter of this year, followed by $800 billion in 2009 ``fueled principally by the financial sector,'' S&P said. The amount due drops to $633 billion in 2010 and to $510 billion the following year.

Germany has the largest amount of financial company debt that may need refinancing, followed by Sweden, the Netherlands, France, Italy, Spain and the U.K., according to the report. Borrowers in those countries account for about 85 percent of total financial debt maturing in Europe.

Germany's ranking is the result of the importance of the country's market for covered bonds, securities backed by public- sector loans or mortgages, which accounts for ``nearly all'' financial-company secured debt, S&P said. Out of the $244 billion of secured debt maturing in 2009, almost $162 billion is attributable to German financial-services companies.

French Repayments

Among non-financial borrowers, French companies must repay the most in the period, followed by the U.K., Germany, the Netherlands and Italy, S&P said. For such companies, the share of investment-grade credit maturing in the next three years is 76 percent in Europe, compared with 55 percent to 60 percent in the U.S., S&P said.

While the amount of debt due for refinancing is a risk, its effect has to be ``placed in the context of a financial landscape increasingly peppered with government guarantees,'' S&P said.

European nations last month committed $2.3 trillion to shore up their banking systems and part of that is ``likely to be earmarked for guaranteeing medium-term issuance and may thereby offset refinancing pressure, even if private markets fail to revive fully,'' according to the report.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

Last Updated: November 11, 2008 11:03 EST