Maturing EMEA debt tops $1trn over next four years

Moody’s expects the majority of this outstanding debt to be refinanced with most sectors generating positive free cash flows.

Investment grade non-financial companies in the EMEA region have $2.9 trillion in maturing debt on aggregate, with just over $1 trillion set to mature between 2018 and 2021.

An average of $259 billion will mature each year during that period, amounting to 9 percent of the total debt, according to a report from Moody’s Investors Service, which tracks the debt maturity profiles and refinancing requirements of 367 Moody’s-rated investment grade non-financial companies. About $1.3 trillion (44 percent) matures beyond 2021.

The report predicts that “the large majority” of the outstanding debt will be refinanced as the capital structures of the companies are not expected to change dramatically and most sectors are generating positive free cash flows which can be used to pay down debt.

Companies domiciled in Germany, France and the UK account for half of all reported debt maturing in 2018 and beyond, with Germany and France representing nearly half of the outstanding cash balance. This reflects a similar proportion to that seen over the last few years. 

Moody's pie chart

The utility and energy sectors lead the way in terms of volume of debt outstanding, followed by telecommunications and transportation. Between them, these four sectors hold about $1.5 trillion in debt, or 52 percent of the total debt outstanding.

Bank debt accounts for around 21 percent of total debt maturities in 2018-21 compared with 23 percent in Moody’s equivalent 2016 report for debt maturing between 2017-20.

The latest report says this trend – which would have been influenced by bank deleveraging in previous years – is now more likely explained by continuing low interest rates and corporate bond buying by central banks, which has fostered issuance.

About half of the total debt is held by companies with Baa ratings, with 37 percent held by single A and 13 percent by Aaa/Aa.