Companies lengthened maturity walls through new issuance in 2021. Globally, nonfinancial and nonfinancial corporate issuers rated by S&P Global Ratings reduced maturities in 2022-2026 by 2%, while adding to maturities in later years.

Financing conditions were remarkably supportive for issuers last year as central banks maintained accommodative monetary policies that helped keep interest rates and borrowing costs low. Many companies took the supportive conditions as an opportunity to lock in longer-term funding at low rates. Issuers might also have wanted to shift maturities further out amid growing inflation concerns and the possible acceleration of the Federal Reserve's policy tightening.

Companies normally reduce maturities over the coming one to two years to minimize near-term refinancing risk and strengthen liquidity with new debt maturing in later years. However, over the six months that began July 1, 2021, we found that annual maturities for financial and nonfinancial corporates fell in each year through 2025. Additionally, the increase in debt maturing five years out (in 2026) showed a smaller-than-expected increase of 9%. The steepest increase in annual maturities is seven years out, in 2028 (see chart 1).

Chart 1

This analysis is based on a review of debt instruments (including bonds, notes, loans, and revolving credit facilities) rated by S&P Global Ratings and issued by financial and nonfinancial corporate borrowers globally. Debt amounts have been aggregated by issue credit rating, and regional breakouts are aggregated by the parent's country of incorporation.

Table 1

Maturing Amounts Remain Below Recent Issuance Volumes

Investment-grade

Investment-grade (rated 'BBB-' or higher) bond issuance chalked up its second-highest annual total of the past eight years in 2021, with $2.24 trillion. This issuance volume is considerably higher than upcoming annual maturities of investment-grade bonds, which reach a high of $1.67 trillion in 2023. Over the past eight years, however, annual investment-grade bond issuance was higher than that level, averaging $2.16 trillion. If issuance continues at recent levels, it would provide more than sufficient liquidity for companies to meet annual investment-grade bond maturities through 2026, barring any acute or prolonged recession or capital market disruption (see chart 2).

Chart 2

Speculative-grade

Investment-grade debt accounts for nearly 74% of the debt maturing through 2026. When investors shift away from lower-quality credit toward this higher-rated debt, speculative-grade (rated 'BB+' or lower) debt can face greater refinancing risk. However, that was not the case in 2021. Amid the low interest rates and expectations for higher rates in years to come, investor demand and issuer supply surged to new heights in 2021.

In particular, leveraged loan issuance more than doubled to $948 billion, with investors drawn to floating rates. While one might expect such a spike to displace other issuance, speculative-grade bond issuance in fact increased 19% to $696 billion. Taken together, these bond and loan totals pushed leveraged finance issuance to a high of $1.64 trillion.

The surge in loan issuance led to a spike in debt maturing in 2028, when $860.9 billion in financial and nonfinancial corporate speculative-grade debt matures. However, even this high remains below the annual leveraged finance issuance volumes over the past eight years. Companies have several years to refinance, pay down, or otherwise reduce their maturity walls before reaching this high in 2028, and we expect capital markets will be able to generate sufficient liquidity for companies to meet maturing debt demands (see chart 3).

Chart 3

Companies And Investors Position For Rising Rates

The substantial new debt issuance in 2021 boosted the total level of outstanding corporate debt (including debt maturing after 2026) by 3%. While investment-grade debt grew by 1% to $17.2 trillion, speculative-grade was up 9% to $5.65 trillion. Leveraged loans accounted for much of this increase (see chart 4). While this demand provided companies with extremely attractive financing conditions for issuing loans in 2021, their funding costs could rise with future rate increases.

Chart 4

The $11.0 trillion in global debt scheduled to mature through 2026 represents about 48% of the total pool of rated debt. Including maturities after 2026, global rated debt totals $22.8 trillion (see table 2). Debt maturing over the next five years now represents a smaller portion of the total debt than it did at the beginning of 2021, when 51% of total rated debt was set to mature within the next five years.

Table 2

Nonfinancial Corporate Maturities Peak In 2026

Nonfinancial corporate debt accounts for about $6.84 trillion of debt maturing through 2026, and 61% of this is investment-grade.

Nonfinancial maturities rise from $1.04 trillion in 2022 to a peak of $1.58 trillion in 2026 (see chart 5). The nonfinancial debt scheduled to mature in 2026 increased by 8% in the second half of 2021. Often we observe a steeper increase in debt maturing four years out, but over the past year, more of the newly issued debt was set to mature in later years.

Through 2021, nonfinancial companies reduced the amount of debt maturing in the next two years by 18%, led by a decrease in speculative-grade debt. This was a steeper decrease than in 2020, when debt maturing within the next two years was reduced by 10%.

Chart 5

The 'BBB' category makes up the largest share, at 39%, of the $6.84 trillion in nonfinancial corporate debt maturing through 2026 (see chart 6). When we include all debt instruments, including those maturing after 2026, the 'BBB' category accounts for a slightly larger share, at 42%.

This is of particular note because 'BBB' is the lowest rating category within investment-grade. With its higher credit quality and broader base of investors, investment-grade debt greatly exceeds speculative-grade debt, and the 'BBB' category alone exceeds total speculative-grade debt among nonfinancial entities. Within the 'BBB' category, most debt is rated 'BBB+' or 'BBB', while just 30% of the 'BBB' category nonfinancial debt maturing through 2026 is rated 'BBB-'.

Chart 6

Speculative-grade nonfinancial maturities reach their highest point in 2028

Speculative-grade debt represents just a small share of the total maturing in the next couple of years. However, this share steadily rises from just 21% in 2022 to 50% in 2026 and 59% in 2028.

Just 11% of speculative-grade maturities through 2023 are rated 'CCC+' or lower. Most speculative-grade maturities during this period are rated in the 'BB' category. This debt should pose less refinancing risk than lower-rated debt. Investor demand for 'BB' debt remains strong because of higher-than-investment-grade yields, coupled with relatively acceptable credit risk.

With the strong issuance in 2021, companies reduced the speculative-grade nonfinancial debt maturing in 2022 by 43%, which was partially offset by a 25% increase in 2026 maturities (see chart 7). As U.S. companies looked to lock in interest rates ahead of Fed rate hikes, more speculative-grade nonfinancial bonds came to market in 2021 with a maturity of seven to 10 years than in 2020.

Maturing nonfinancial speculative-grade debt now peaks in 2028 at $808 billion. Often we find that upcoming speculative-grade maturities reach their peak after about five years, but with the recent volume of new issuance, speculative-grade maturities now reach their peak maturity seven years out. This offers companies a wider window in which to refinance or pay down their debt.

Chart 7

Utilities lead in nonfinancial debt maturing through 2026

Among the nonfinancial sectors, utilities and consumer products have the highest amounts of debt maturing through 2026. Utilities have the most investment-grade debt maturing in this period, at $585 billon, and the high ratings in the sector reflect the regulated nature of much of the industry. Utilities' capital spending is expected to remain high in coming years, reflecting necessary investment in energy transformation and network upgrades.

Meanwhile, the media and entertainment sector, including the leisure subsector, accounts for the highest amount of speculative-grade nonfinancial debt maturing through 2026, with $428 billion. After COVID-19 social distancing measures hit travel, leisure, and out-of-home entertainment especially hard, this sector faces a long road to recovery. Media and entertainment companies also face continued challenges with new waves of the pandemic, though a relatively small share (18%) of the sector's speculative-grade debt is set to mature in 2022 and 2023.

Table 3

Financial Services Debt Maturities Peak In 2023 At $953 Billion

Financial services have $4.17 trillion in rated debt scheduled to mature through 2026. Annual maturities rise to a peak of $953 billion in 2023.

Financial services bond issuance increased by about 10% in 2021 to $1.54 trillion, surpassing 2020's volume even as investment-grade issuance from nonfinancials did not. With this new issuance, financial debt maturities for 2022 fell by around 13%. This pace of debt reduction was considerably higher than in 2020, when the upcoming year's maturities decreased by 2%.

Over the past year, financial services companies have also stretched their maturity walls, but to a lesser extent than nonfinancial companies have. While nonfinancials' maturities in 2026-2028 rose by 39% in 2021, the comparable increase over the same period for financial services was 31% (see chart 8).

Chart 8

Financial services bond issuance has held above $1.2 trillion annually over the past eight years. This volume shows more than sufficient capacity from credit markets to provide liquidity for companies to meet upcoming maturities, which remain below $950 billion annually through 2026 (see chart 9).

Chart 9

94% of financial services debt maturing through 2026 is investment-grade

Roughly 94% of the financial services debt maturing through 2026 is investment-grade. The largest share of this debt is in the 'A' category, at 41%, followed by the 'BBB' category, with 30% (see chart 10).

Just 6% ($233.4 billion) of the $4.2 trillion of financial services debt maturing through 2026 is speculative-grade. This mostly consists of banks' subordinated debt (which is rated below the issuer credit rating), as well as the debt of speculative-grade nonbank financial institutions.

Chart 10

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 Jan. 1, 2022.

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 will have already accommodated some of the debt remaining in this year, given normal data-reporting lags.

We aggregated the data by issue 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 the 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 Looks Set To Contract 2% This Year As Monetary Policy Tightens, Jan. 31, 2022