S&P Ratings estimates that 37% of corporates (based on a global sample of 13,000 entities) could be categorised as highly leveraged in 2017 (i.e. debt-to-earnings of above five times), that's five points more than in 2007.
KUALA LUMPUR: S&P Global Fixed Income Research expects global bond issuance in 2018 will ultimately be little changed on an aggregate basis from the 2017 total, with an overall decrease of 0.4%.
In its report issued on Thursday, it said a large decline in US public finance will likely be offset by increases in global structured finance and financial services.
"Meanwhile, we expect a slight decline among nonfinancial corporates, which face modest headwinds in the U.S. via tax reform and have a difficult act to follow in 2017's global totals," said Diane Vazza, head of S&P global fixed income research.
Borrowing costs remain muted in the US and Europe, in many cases reaching historical lows over the past two years. The current favorable lending conditions in these regions are expected to extend into the first half of this year, with increased potential for more restrictive conditions later in the year.
Geopolitical risks to bond issuance in 2018 are already coming to the fore, with many countries facing upcoming elections (or coalition building) in Europe and Latin America.
“Tax reform in the US has become law and includes potentially debt-deterring provisions. The Brexit process will soon start addressing more difficult and crucial topics in a substantive way, and a developing issue surrounding China's future Treasury purchases may cause market disruption as well,” Vazza said.
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