European Companies Face $1.2 Trillion of Refinancing by 2015, Moody’s Says

Investment-grade borrowers in Europe need to refinance more than $1.2 trillion of debt in the next four years, Moody’s Investors Service said.

Issuers have $726 billion of bonds and $373 billion of bank loans maturing through 2015, Moody’s said in a report today, citing 295 companies it rates in Europe, the Middle East and Africa. New York-based Moody’s expects companies’ reliance on bond markets to increase as banks “remain constrained in the provision of credit,” according to the report.

“With banks focused on rebuilding capital buffers rather than increasing lending, corporates have turned to the bond markets to meet their refinancing requirements,” Moody’s analysts Jean-Michel Carayon, Myriam Durand and Lola Cavanilles wrote in the report.

Telecommunications, energy and automotive companies have the greatest amount of debt maturing in the next four years, Moody’s said. The highest concentration of borrowers with bonds maturing in that time are in the A3 ratings category, including Daimler AG, Volkswagen AG and France Telecom SA, Moody’s said.

Yields Drop

European investment-grade corporate bond yields fell to 3.09 percent on Nov. 1, the lowest in a year and down from 3.67 percent in July, according to Bank of America Merrill Lynch’s EMU Corporates, Non-Financial index. Yields now average 3.10 percent, less than the 3.25 percent on average for non-financial companies worldwide, the bank’s data show.

The yield on European company securities relative to benchmark government debt narrowed 39 basis points since Sept. 30 to 166, which is less than the 175 basis-point global average, Bank of America Merrill Lynch indexes show. A basis point is 0.01 percentage point.

Issuers in Europe sold about $28 billion of investment- grade bonds in the third quarter of 2011, down from $56 billion in the first quarter. That puts total issuance for the year on pace to be closer to the $151 billion issued in 2010 than the $315 billion in 2009, Moody’s said.

“Most companies have been cautious about the discretionary use of cash and have used periods of favorable market access to extend their debt-maturity profiles,” the analysts wrote. “As a result, companies are better positioned for a short-term downturn, with high cash balances and lower debt maturities in the next 12 months.”

To contact the reporter on this story: Abigail Moses in London at

To contact the editor responsible for this story: Paul Armstrong at

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