The spurt in issuance of high-yield debt reduced the amount of corporate borrowings maturing in 2014 by 71 percent, JPMorgan Chase & Co. analysts wrote in a report last week.
Speculative-grade bond and loan sales of $269 billion this year, have exceeded the more than $250 billion of annual issuance since 2010. The sales have cut the amount of debt maturing in 2014 to $127 billion and the total borrowings coming due in the three years through 2014 has been cut by $767 billion since the start of 2009.
The focus by companies on extending maturities and improving liquidity has been the main reason for the low default backdrop, according to the New York-based lender. The U.S. speculative-grade default rate will decline to 3 percent by September 2013 from 3.5 percent at the end of last month, according to an Oct. 18 report from Moody’s Investors Service.
“It was only a few years ago that credit investors were fixated on the upcoming maturity schedule,” JPMorgan analysts led by New York-based Peter Acciavatti wrote in the report. “Record capital market conditions have improved corporate liquidity and minimized the imminent need to access capital.”
By the end of 2014, $188 billion of debt is set to mature, which is equivalent to the refinancing volume in the first seven months of the year, JPMorgan said. Maturities for the three years starting 2012 have been cut by $194 billion, $271 billion and $303 billion, according to the report.
Bonds and institutional loan issuance of $82 billion in September was the second-highest monthly volume on record, trailing only May 2011’s $83.9 billion, according to the bank.
Leveraged loans and high-yield, high-risk, or junk, bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.