Fitch: Markets Rebound as Refinancing Peak Fast Approaches
Loan refinancing activity and robust high-yield bond issuance extended or diminished $110 billion of loans within the refinancing cliff timeframe during the first quarter 2012. Despite the pickup in activity levels, the market still needs to refinance or extend approximately $667 billion of loans expected to mature between 2013 and 2014, according to Fitch’s “Bridging the Refinancing Cliff, Volume V,” published by Fitch Ratings.
The market has been intensely focused on refinancing and extending longer dated maturities in the 2013 and 2014 timeframe through loan refinancing, amend-and-extend transactions and bond-for-loan takeouts. During the first quarter, approximately $50 billion of loans set to mature in 2013 and 2014 were refinanced, extended, or taken out with a bond issue. In this latest installment in the series, Fitch focused on those select number of issuers with large amounts of loan and bond debt coming due in 2013 and 2014.
Macroeconomic distress in Europe and lackluster economic progress in the U.S. weighed on the U.S. debt capital markets in the second half 2011, impeding efforts over the last two years to redistribute loan maturities. During the second half 2011, loan refinancing, amend-and-extend transactions and bond-for-loan takeout volumes slowed considerably. As a result, only $97 billion of loans were extended beyond 2015 in the second half of last year.
This installment of the series also provides a breakout of the middle-market refinancing cliff. At $485 billion, the middle-market refinancing cliff represents a significant challenge for the middle market. The rebound in middle-market loan issuance over the last two years has reduced a meaningful portion of the middle-market refinancing cliff. However, the pace of reduction has lagged that of the broadly syndicated refinancing cliff. The market’s success in handling the middle-market refinancing cliff will depend on the availability of capital and lenders’ dedication to the middle-market sector.
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