Capital Markets

More than $100B in Debt Coming Due

The largest quarterly repayment in about five years comes as interest rates are rising, especially for longer maturities.
Stephen TaubApril 7, 2005

Treasurers’ skills are about to be put to a big test.

According to the Financial Times, between $113.6 billion and $117.3 billion of debt will come due during the next three months, citing Fitch Ratings and Thomson Financial, respectively. This is the largest quarterly repayment in about five years, the paper added.

Companies that need to refinance will be dealing with a rising interest rate environment. Longer maturities have recently begun to rise more quickly than shorter ones, posing a difficult decision for executives who must determine where on the yield curve they should finance new debt.

“This is where company treasurers get to show what they’re made of,” Glen Reynolds, head of CreditSights, told the paper. “What with Treasury yields rising, corporate coupon rates are going to rise and with the yield curve steepening, treasurers will have to make a decision on how best to finance themselves.”

Credit spreads have been widening lately, due in part to profit warnings from General Motors and the accounting scandal engulfing American International Group. The FT pointed out, however, that credit spreads are still very tight and that many companies refinanced during the past few years when rates dropped to record lows.

“The reality is that most borrowers have probably already pre-funded these maturities, given that until the last couple of weeks the market has been offering very attractive long-term financing opportunities,” Jim Merli, global head of fixed income syndicate at Lehman Brothers, told the paper. “It’s significant in itself that it’s the biggest quarter for some time, but it won’t necessarily have a great market impact.”

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