Credit Rollovers Key to Liquidity of Non-Financial Companies

by: Research Recap

Rollover of revolving credit facilities is the key to sustaining adequate liquidity among non-financial companies, according to Moody’s.

In its Spring survey of liquidity conditions of 1,300 non-financial, non-utility companies in the Americas, Moody’s said the majority of rated issuers (91%) benefit from committed revolving credit facilities as a reliable source of external funding. “Over the next 12 months, approximately 13% of these issuers face either partial or total maturities of their revolving credit facilities. While revolving credit facilities were easily extended when financial market conditions were robust, bank capital and lending appetites are more constrained and lenders may seek to amend facility size or terms upon renewal, weakening the liquidity profiles of some issuers.”


Other highlights:

  • Approximately 94% of the issuers appear to have sufficient internal and external sources of liquidity to cover debt maturities and other cash outflows over the next 12 months.
  • Financial covenants are currently either tight or restrictive for approximately 9% of the investment-grade issuers and 31% of the speculative-grade issuers. Of the companies with financial covenants, 1% had to seek covenant waivers over the last 12 months while 9% amended their covenants.
  • Only about 3% of investment-grade issuers face a medium to high likelihood of violating covenants, while about 16% of non-investment grade companies we assessed face a medium to high likelihood of violating covenants.

Total debt maturities over the next 12 months are estimated to be approximately $320 billion. About $60 billion of maturities for speculative-grade companies is substantially higher than the level during the past two years. Maturities will continue to increase over the next several years, posing an escalating liquidity challenge for low-rated companies.

For details see: Liquidity Challenges Remain For Non-Financial Companies in Americas.