S&P Global Ratings rates $12.1 trillion in corporate debt (including bonds, loans, and revolving credit facilities) that is set to mature globally from July 1, 2021, through Dec. 31, 2026. While this estimate of the amount of debt maturing over the next 5.5 years is in line with our $11.86 trillion estimate from one year ago, the timing of maturities has changed. Companies have reduced the amount of near-term debt maturing from July 1, 2021, through Dec. 31, 2022, by 9% since later maturities in 2026 have risen by 30% (see chart 1).

Chart 1

Pace Of Debt Growth Slows

The total level of outstanding corporate debt (including bonds, notes, loans, revolving credit facilities, and perpetuals with an issue credit rating, and including those maturing after 2026) rose by 3.1% in the first half of 2021. But growth was concentrated in speculative grade.

The level of investment-grade debt was more stable in the first half of 2021 at $17.3 trillion--the volume of new issuance fell by 25%. Meanwhile, the level of speculative-grade debt grew by 8% (to $5.6 trillion) as the volume of new issuance of both leveraged loans and speculative-grade bonds surged with investors' appetite for yield (see chart 2).

Chart 2

Recent Issuance Volumes Exceed Upcoming Annual Maturities

Investment grade

While new investment-grade issuance volumes may be down, recent issuance remains well above upcoming maturities. Just over $700 billion in investment-grade debt is set to mature in the second half of 2021 (and $1.68 trillion is set to mature over the next 12 months), and more than $2 trillion in investment-grade bonds were issued over the past 12 months. Through these recent issuance volumes, the bond market has shown more than sufficient liquidity for companies to refinance maturing debt obligations, barring any acute or prolonged recession or capital market disruption.

Investment-grade maturities peak in 2023, when $1.82 trillion in global debt from financial and nonfinancial corporates is scheduled to mature. By comparison, investment-grade bond issuance has exceeded that level in each of the past seven years (see chart 3).

Chart 3

Speculative grade

Investors' search for yield provided ample demand for new leveraged finance issuance in the first half of 2021. Speculative-grade bond issuance jumped by 52% to $437 billion in the first half of 2021 and leveraged loan issuance surged by 104% to $515.53 billion. Upcoming maturities for speculative-grade debt of $78 billion in the second half of 2021 (and $228 billion over the next 12 months) remain far below recent annual volumes of leveraged finance issuance.

Speculative-grade maturities reach a peak of $893 billion in 2025. However, even that level is below the recent leveraged finance issuance volumes, which exceeded $1 trillion annually over each of the past four years. As companies have several years to refinance, pay down, or otherwise reduce their maturity wall before it reaches a peak in 2025, we expect capital markets will generate sufficient liquidity to meet maturing debt demands (see chart 4).

Chart 4

Overview Of Corporate Debt Maturing Through 2026

About 73% of the debt maturing through 2026 is investment grade. With investor demand running high for corporate debt, we expect debt capital markets will provide more than sufficient funding for these companies to meet maturity demands.

Nonfinancial corporates account for most of the debt maturing through 2026. While investment-grade debt is split nearly equally between financial and nonfinancial issuers, more than 90% of speculative-grade debt is from nonfinancial issuers.

Chart 5

Chart 6

By region, the U.S. (including tax havens of Bermuda and the Cayman Islands) accounts for 45% of the debt, Europe 39%, and the other developed region (which includes Australia, Canada, Japan, and New Zealand) accounts for 10%. Emerging market debt accounts for 6.6% of maturities through 2026, and this reflects (in part) that we rate a more-narrow slice of this foreign market debt. As this study reviews the maturity wall of rated corporate debt, coverage is limited where markets are less mature and a lower proportion of debt is rated.

Table 1

More companies have been issuing longer-tenor debt over the past year to lock in low interest rates. As a result, the median maturity of the current pool of outstanding debt instruments is now 5.13 years, up from 4.97 years (as of July 1, 2020), and a slightly smaller share of global debt is set to mature over the next 5.5 years.

The $12.1 trillion in global debt scheduled to mature over the next 5.5 years (through 2026) represents about 52.9% of total rated debt; this is down from one year ago, when 55.5% of total rated debt was set to mature within the next 5.5 years.

Table 2

Nonfinancial Corporate Maturities Rise Through 2025

Nonfinancial companies have several years before their maturity wall reaches its peak. Maturities rise from $440.5 billion in the second half of 2021 (and near $1 trillion over the next 12 months), to a peak of $1.66 trillion of in 2025 (see chart 7).

Over the past year, nonfinancial companies reduced the amount of debt maturing in the next 18 months by 14%. This pull-forward rate for nonfinancials largely mirrors what we saw this time last year, when global nonfinancial companies had reduced maturities in the upcoming 18 months by 16%.

Chart 7

By grade, 60% of nonfinancial corporate debt maturing through 2026 is investment grade; speculative grade accounts for a higher share of the debt maturing in later years. The 'BBB' rating category accounts for the largest share of nonfinancial debt, at 42.4%, and 39% of the nonfinancial debt maturing through 2026. Investment-grade debt is often issued with a longer tenor than speculative-grade debt, and 'BBB' category nonfinancial instruments currently have a median maturity of 5.8 years--longer than the 4.5-year median for the 'BB' category (see chart 8).

Chart 8

Because the 'BBB' category is the lowest within investment grade, issuers typically face higher funding costs if their debt is downgraded to speculative grade. 30% of 'BBB' category debt maturing through 2026 is rated 'BBB-', the lowest investment-grade rating level. With economic growth rebounding in the U.S. and China, we expect the risk of downgrade to speculative grade for 'BBB' category issuers has rapidly declined over the past year. Since financing conditions remain exceptionally accommodative, the cost of a notch between the spread on a 'BBB-' and a 'BB+' bond in the U.S. has narrowed this year and is back in near its long-term average of 89 basis points.

Speculative-Grade Nonfinancial Maturities Reach A Peak of $825 Billion In 2025

Speculative-grade accounts for just 20% of debt maturing over the next 12 months. This share rises sharply in later years--eventually reaching 52% in 2026 when $760 billion in speculative-grade nonfinancial debt matures (see chart 9).

Chart 9

Near-term speculative-grade maturities are largely concentrated in the 'BB' category, which accounts for 62% of speculative-grade nonfinancial maturities over the next 12 months. Financing conditions remain highly supportive for speculative-grade borrowers in the current low interest rate environment--average new-issue speculative-grade bond yields in the U.S. fell to 4.83% in June, marking a new all-time low according to Leveraged Commentary & Data.

Amid strong demand for new speculative-grade bond and leveraged loan issuance in the first half of 2021, companies reduced the amount of speculative-grade nonfinancial debt maturing over the next 18 months by 25%. Maturities in 2026 rose by 19% (to $760 billion) in the first half of 2021 since much of the newly issued debt had a five- to eight-year tenor (see chart 10).

Chart 10

Although debt rated 'B-' and lower accounts for just 18% of the speculative-grade maturities over the next 12 months (or $38.5 billion), it represents a larger share of maturing debt in subsequent years, accounting for nearly 30% of speculative-grade maturities in 2024 and 2025.

While financing conditions have been very supportive for this lower-rated debt in 2021, financing conditions can quickly turn with shifts in investor sentiment. In such a scenario, individual issuers, particularly those at the lowest rating levels and those viewed as distressed by the market, could face funding challenges including higher funding costs and limited funding options to meet maturing debt demands. But with several years before the largest sums of 'B-' and lower debt reach maturity, companies have time to refinance or pay down this debt (see chart 11).

Chart 11

Utilities And Consumer Products Have The Most Nonfinancial Corporate Debt Maturing Through 2026

Among the nonfinancials, the utilities and consumer products sectors have the highest amount of debt maturing through 2026; media and entertainment has the highest amount of speculative-grade debt maturing (see table 3).

Table 3

Utilities have $766.5 billion in debt scheduled to mature through 2026. 83% of this debt is investment grade--the highest share of any of the nonfinancial sectors, reflecting the regulated nature of much of the industry. We expect funding demand from utilities to remain high in upcoming years, fueled by capital expenditures to reduce carbon emissions and boost investment in critical infrastructure projects.

The consumer products sector's $743 billion in debt is scheduled to mature globally through 2026; 59% of this debt is investment grade. Within the sector, the large, branded staple companies did not experience a deterioration in demand during the pandemic, and although discretionary subsectors, including restaurant service and luxury goods faced a steep decline, these subsectors are benefiting from a resurgence in demand from consumers in the U.S. and China.

The media and entertainment sector leads other nonfinancials with the most speculative-grade debt maturing through 2026 at $493.2 billion. 71% of the sector's debt maturing through 2026 is speculative grade--the highest proportion among all sectors. A full recovery to the 2019 levels of credit quality for this sector varies among the subsectors. We expect ad-supported media to recover in 2021 in North America, and in 2022 in Europe, the Middle East, and Africa. But the travel and leisure subsector is not expected to return to 2019 credit quality before 2023 or later. While some of the companies in this sector face a longer path to recovery, just $16.9 billion of the sector's speculative-grade debt is set to mature over the next 12 months.

Financial Services Debt Maturities Peak In 2023 At $948.4 Billion

Financial services have $4.47 trillion in rated debt scheduled to mature through 2026, with maturities rising to a high mark of $948.4 billion in 2023.

Financial services bond issuance is up 3.8% year to date, even as overall bond issuance has declined from 2020 highs. With this new issuance, financial services reduced the amount of debt maturing over the next 18 months by 5% so far this year. This pace of debt reduction for the upcoming maturities was higher than in the first half of 2020, when the maturities of the upcoming 18 months were lowered by just 2%.

In the first half of 2021, the amount of financial services debt maturing through 2026 rose by 3%, as the reduction in 2021-2022 maturities was offset by an increase in debt due in later years (see chart 12).

Chart 12

Robust issuance volumes in recent years have shown capital markets providing more than sufficient capacity to meet refinancing demands from financial services borrowers. While financial services bond maturities remain below $1 trillion annually through 2026, financial services bond issuance has held above $1.2 trillion annually over the past seven years (see chart 13).

Chart 13

94% Of Financial Services Debt Maturing Through 2026 Is Investment Grade

Debt from the financial services sectors is largely concentrated in the investment-grade rating categories: 94% maturing through 2026 is investment grade, the largest share of which is in the 'A' category, with 39% (or $1.7 trillion) (see chart 14).

This financial services debt is composed mostly of debt from banks and financial institutions. Insurers account for less than 10% of the total; banks and financial institutions account for more than 90%. Although credit quality sharply deteriorated across sectors in 2020 with the onset of the COVID-19 pandemic, bank ratings were more resilient with fewer downgrades because credit quality was supported by strong balance sheets and government-support programs.

In addition to the investment-grade debt, about $249 billion in speculative-grade debt from financial services is set to mature through 2026. This mostly consists of debt from U.S.-based finance companies, subordinated debt from European banks, and emerging markets banks (led by Brazil and Russia).

Chart 14

Europe Accounts For The Majority Of Financial Services Debt

By region, Europe accounts for 52% of financial services debt maturing through 2026 (with $2.3 trillion), followed by the U.S. (with $1.28 trillion) and the other developed region (with $642.4 billion). Emerging markets have the lowest amount of financial services debt maturing through 2026 (with $232.7 billion), but the region has a higher share of its debt rated speculative grade (18%) than the other regions (see chart 15).

Chart 15

Data Approach

For this analysis, we investigated the potential refunding needs of financial and nonfinancial corporate debt rated by S&P Global Ratings.

For each region, we included the rated debt of all parent companies and their foreign subsidiaries. We counted the debt of all of these companies regardless of the currency or market in which the debt was issued. We converted any non-U.S.-dollar-denominated debt to U.S. dollars based on the exchange rates on July 1, 2021.

The issue types covered include loans, revolving credit facilities, bank notes, bonds, debentures, convertible bonds, covered bonds, intermediate notes, medium-term notes, index-linked notes, equipment pass-through certificates, and preferred stock. In the case of revolving credit facilities, the amount usually represents the original facility limit, not necessarily the amount that has been drawn. Debt amounts are tallied as the face value of outstanding rated debt instruments. We excluded individual issues that are not currently rated at the instrument level, as well as instruments from issuers currently rated 'D' (default) or 'SD' (selective default). We expect the credit market may have already accommodated some of the debt remaining in this year, given normal data-reporting lags.

We aggregated the data by issue-level credit rating. We also aggregated sector-specific data according to the subsector of the issuer. The financial sector is defined as all banks, brokers, insurance companies, asset managers, mortgage companies, and other financial institutions. We aggregated debt issued by financial arms of nonfinancial companies with the sector of their corporate parent. We excluded government-sponsored agencies such as Fannie Mae and Freddie Mac, project finance, and public finance issuers.

Related Research

• Global Financing Conditions: Bond Issuance Remains Strong Despite An Expected Modest Contraction, July 26, 2021
• Global Banking Country Outlook Midyear 2021: Tantalizing Signs Of Stability, July 22, 2021
• 'BBB' Pulse: Most 'BBB' Debt Is Now On Track For A Near-Term Recovery, July 7, 2021
• COVID-19 Heat Map: Pent-Up Demand And Supply Shortages Further Improve Recovery Prospects For Credit Quality, June 8, 2021
• Nonbank Finance Companies Capitalize On Lower Rates And Pent Up Investor Demand, May 4, 2021