Moody's Investors Service said that Volkswagen AG and Daimler AG are at the top of the list of European companies that have to repay over $1 trillion of maturing debt in the next four years, raising the risk of borrowers struggling to refinance as interest rates climb.
In a published report, Moody's analysts led by Jean-Michel Carayon in Paris wrote that investment-grade companies in Europe, the Middle East and Africa have about $380 billion of bank debt and $650 billion of bonds maturing from 2011 to 2014. Moody’s said that Volkswagen has the most debt coming due with $46.2 billion.
Rival Daimler ranks second with $39.9 billion. According to data compiled by Bloomberg, non-financial borrowers sold 92.1 billion euros ($127.7 billion) of investment-grade debt in Europe this year after a record 279.3 billion euros of issuance in 2009.
Sales were strengthened due to the borrowing costs being at a five-year low. Moody’s analysts also wrote that the companies’ ability to refinance debt is being challenged by a deterioration in Europe's economy as well as higher interest rates.
They stated further that the risk crops up since the refunding may affect the future cost of debt and it’s also possible that it will occur at a time when the borrowing needs of large sovereign issuers are still high.
They concluded that even as Moody's central economic scenario still appears to be a ‘hook-shaped recovery,' the downside risks to this central scenario “include the failure of fiscal policy to restore business and consumer confidence.” [via Bloomberg]