From India’s Vedanta to China’s Evergrande: US$314 billion of debt maturities in 2023 to haunt Asian borrowers as rates rise

Surging borrowing costs may make it a challenge for companies with weaker credit ratings to raise funds to repay maturing debt

About 22 per cent of Asia’s US-dollar notes due in 2023 are either junk grade with lower than BBB- equivalent scores or do not have any credit ratings

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Financing costs for junk-rated dollar bonds in Asia hit their highest in at least a decade in 2022. Photo: Reuters

Published: 12:31pm, 11 Jan 2023

Debt-heavy Asian companies are headed for a reckoning this year when US$314 billion of bonds come due, just as refinancing costs for lower-rated firms have risen close to historic highs.

Firms from India’s Vedanta Resources to stressed property developers such as China Evergrande Group have US-currency debt maturing in 2023, and in total it’s the biggest batch in the coming five years, Bloomberg-compiled data show.

The risk is that surging borrowing costs may make it a challenge for companies with weaker credit ratings to raise funds to repay maturing debt. Financing costs for junk-rated dollar bonds in Asia hit their highest in at least a decade in 2022 though they have since pulled off that peak, Bloomberg-compiled data show. Moody’s Investors Service has warned that in its worst-case scenario, speculative-grade corporate defaults could quadruple globally this year.

In Asia, Chinese property developers suffered a record number of defaults in 2022 while South Korea’s credit meltdown highlighted how quickly regional debt trouble occurring far from a nation’s financial centre can spread to the broader market. While some signs suggest that the worst may be over for bond markets with corporate note spreads worldwide tightening sharply in recent weeks on bets that rate increases will slow, uncertainties remain high.

China Evergrande Group is among the stressed mainland property developers with US-currency debt maturing in 2023. Photo: Bloomberg

“Market liquidity and appetite for refinancing will be the key challenges in 2023,” said Jim Veneau, head of Asian fixed income at AXA Investment Managers Asia in Hong Kong. China’s various efforts to support economic growth aren’t a “cure-all”, but primary bond market activity should pick up as a result of numerous and targeted property policies and the end of zero-Covid, he said.

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