Cracks are deepening for vulnerable emerging-market companies as global borrowing rates surge to the highest levels since the financial crisis, halting refinancing opportunities for $400 billion worth of debt maturities coming due in the new year.
“I see in particular some corporates out of China, Argentina, Brazil and Ukraine vulnerable to refinance debt in this environment,” Dergachev said. “High yield is the area of concern,” said Warren Hyland, a money manager at Muzinich & Co. “We are at that point in the cycle when we should expect weaker credit matrix companies to underperform and when funding becomes restrictive, allocation to single B/CCC and frontier markets should be reduced.”
High-yield companies have had a hard time refinancing bonds this year, with only one out of four closed deals coming from junk-rated companies. This group has raised a combined $11 billion in refinancings, a fraction of the $75 billion mopped up in 2021. As these companies see their investment appeal being eroded by refinancing pressures, higher-rated firms are benefiting.