Moody’s spots high-yield issuance slide in Asia

Asian high-yield issuance, driven mainly by refinancing, continued to slow in the second quarter of 2018 from the previous quarter against a backdrop of tightening credit conditions, rising interest rates and strengthening of the US dollar, says credit rating agency Moody’s.

As a result, bond issuance in the first half of 2018 totalled US$15 billion (498.5 billion baht), 30% lower compared with $21.6 billion in the first half of 2017. A total of 26 bond deals closed in the second quarter of this year, and China- and Indonesia-based property companies accounted for all deals except one, which was from Cambodian gaming operator NagaCorp Ltd.

“Around 76% of issuance was rated at B1 or below, up from last quarter’s 62%, and primarily came from existing issuers, as credit conditions become more challenging for high-yield issuers,” said vice-president and senior credit officer Annalisa Di Chiara.

During June, the Asian Liquidity Stress Indicator showed a tightening in liquidity for high-yield issuers and moved above 30% for the first time since December 2016, ending the month at 30.9%, up from 28.5% in June and 29% in May.

“Although liquidity has tightened across many sectors over the last quarter, refinancing risk remain manageable in 2018-19 for most companies,” said Ms Di Chiara. “Absent any exogenous shocks, the market is likely to absorb upcoming maturities.”

Some $201 billion worth of rated and unrated high-yield bonds are set to mature through to 2022, and $3.8 billion in rated bonds will mature by July 30, 2019. As of June 30, 162 rated companies had$85.7 billion of rated debt outstanding.