39% of debt maturing in 2022 pertains to speculative-grade issuers: Moody’s

MUMBAI: About 39 per cent of the debt raised by companies through high yield bonds is speculative in nature, a Moody’s report said.

“Almost $6.3 billion or around 39 per cent of the total $16 billion of debt maturing through 2022 pertains to speculative-grade issuers,” the report said.

Many companies that are issuing high yield bonds may continue to face significant financing risks even going ahead as Indian economy grapples with Covid pandemic induced problems. Several highly leveraged large companies and even some mid-scale ones had turned to bonds as they faced liquidity issues during the pandemic. Many companies were even using the funds raised through these high yield bonds for their working capital, industry trackers said.

The Moody’s research report said that market access will remain elusive for financially weaker entities amid elevated bond yields and that a sizeable debt maturities increase the probability for distressed exchanges by speculative-grade issuers. “Supportive funding environment and well spread out maturities underpin strong liquidity for investment-grade companies,” the report added.

A company is often forced to offer high yields to investors when they are unable to or find it hard to raise funds through other traditional sources. The Moody’s research has categorised about $670m bond due Jun 2021 by Vedanta and Bharti Airtel Intl’s EUR 750m bond due May 2021 as speculative. The research said that other “speculative-grade maturities” that are set to mature in 2022 includes JSW’s $500m bond due Apr 2022, Marble II $500m bond due Jun 2022 and Vedanta $1bn bond due Jul 2022.