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Junk-Rated Issuers Tap Demand to Extend Maturities, Moody’s Says

Feb. 5 (Bloomberg) -- Speculative-grade companies have tapped into investor appetite for higher-yielding assets to refinance near-term obligations and extended the so-called maturity wall to 2018, according to Moody’s Investors Service.

About 70 percent of junk-rated bonds and credit facilities come due from 2017 to 2018, with five-year debt maturities for below investment-grade companies increasing to $737 billion, according to a report today from Moody’s. Companies need to contend with $212 billion of debt through the next three years, the report shows.

With the Federal Reserve keeping benchmark interest rates near zero for a sixth year, investors have sought greater returns through riskier, higher yielding assets, enabling low-rated companies to tap the debt market and extend maturities. Borrowers have also been able to lock in lower rates, with the average coupon on the Bloomberg USD High Yield Corporate Bond Index falling to 7.3 percent from 8.1 percent at the end of 2011.

“While refinancing risk will remain low for the next two years, risk has increased over the medium term,” Tiina Siilaberg, a credit analyst at Moody’s said in the report. “Disruptions in the credit markets could affect future refinancing.”

Issuance this year will be led by mergers and acquisitions and dividends and share repurchases, compared with the predominance of refinancing-based offerings last year, according to Moody’s.

Leveraged loans and high-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.

To contact the reporter on this story: Sridhar Natarajan in New York at

To contact the editor responsible for this story: Shannon D. Harrington at

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