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Debt of Moody’s Baa-rated EMEA companies nearly doubles

Publication Date: 03 May 2019 - By ReachX Team By ReachX Team
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Macro Equity Fundamental Accounting Equity UK EU ex-UK MENA

The latest annual issue of Moody’s liquidity study of EMEA [“Europe, Middle East and Africa”] companies from 2009 to 2018 makes for interesting reading, with the rating agency noting the number of its Baa-rated companies and their reported debt has risen significantly over the period.

Total outstanding debt rose to almost $2 trillion in the 2018 liquidity report from $1.3 trillion in 2009, while the number of Baa-rated companies nearly doubled to 303 from 160.

While Baa-rated companies' debt has accounted for the largest share of the total debt of rated EMEA companies since 2009, Moody’s said the proportion of total debt has not changed significantly and was at 41% in 2018 versus 36% in 2009.

Richard Morawetz, Senior Credit Officer and Vice President at Moody’s, said: "Baa-rated firms have less room for manoeuvre to remain investment grade in the face of a downturn. However, at this time we forecast only a slowdown in economic growth.

“In addition, a significant portion of debt is within defensive sectors such as utilities and telecommunications, which are more resilient to a potential turn in the cycle."

Sovereign actions on Russia were the biggest catalyst for EMEA corporate debt moving in and out of investment grade over the past decade.

Of the 29 EMEA companies rated Baa3 in Moody's 2009 liquidity study that continue to be rated presently, 25 have either retained or regained their investment-grade status in the interim, highlighting the strength of their underlying creditworthiness.

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

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