A “wall” of junk debt maturing in the next four years will increase the risk of corporate defaults in the U.S., according to Bank of America Merrill Lynch.
More than $600 billion of high-yield bonds and loans are due to be repaid between 2012 and 2014, New York-based analysts Oleg Melentyev and Mike Cho wrote in a note to clients. Almost 90 percent of loans outstanding mature in the next five years, compared with an average of 36 percent between 2005 and 2009, according to the report.
“While the wall-shaped schedule of future maturities is nothing new for the high-yield issuer universe, it is more front-loaded today,” the analysts said. “This could result in additional default pressures further down the road as issuers deal with a higher concentration of maturities than they what they have been dealing with in the past.”
The looming payments stem from companies shifting their loans to shorter maturities of three to five years, compared with five to seven years in the past, they said.
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