Corporate Bond Issuance in 2014 Still Strong, but Lags Last Year’s Levels
Global corporate new bond issuance has been robust in the first five months of 2014, totaling US$1.5 trillion, but remains lower than the nearly US$1.6 trillion issued during the same period in 2013, reports Standard & Poor’s (S&P) Capital IQ.
The credit ratings agency (CRA) said that last month US$320bn in new corporate bonds came to market, following the US$301bn issued in April 2014 and US$347bn issued in March.
Of the US$1.5 trillion in new corporate debt issued globally through May, US$825bn (55%) was issued by financial companies while US$688bn (45%) was issued by non-financial companies. By rating, US$888bn (59%) was investment grade and US$232bn (or 15%) was speculative grade. S&P did not rate US$392bn of the debt that came to market in the first five months of 2014.
At the lowest end of the rating spectrum, US$3.6bn of debt rated B- and lower came to market in May this year, against US$12.4bn in April, US$8.7bn in March, US$4.7bn in February, and US$8.8bn in January. “Continued access to the capital markets is essential for many less creditworthy companies to avoid defaulting on their obligations,” commented S&P.
Defaults occurrences remained low globally, with only 1.81% of speculative-grade companies defaulting in the 12 months through April 2014, down from 2.27% in 2013 and 2.56% in 2012.
“With a significant amount of corporate debt set to mature over the next few years, it is essential that investors continue to allocate capital to the credit markets,” commented S&P. “We estimate that about US$8.9 trillion in rated corporate debt is scheduled to mature between 2014 and 2018.
“Given the robust new issuance activity in recent quarters, a portion of the US$1.6 trillion that is due in 2014 has likely already been refinanced but it is not completely reflected in our dataset due to reporting lags.”