KEY POINTS:
New Zealand and Australian corporates have their debt refinancing plans well in hand despite the global credit crisis.
That is the view of rating agency Standard & Poor's in a report issued yesterday.
The agency examined the debt refinancing needs of Australasian rated companies this year. It found that $28.6 billion or 18 per cent of the sector's $155 billion outstanding debt is set to mature in 2008.
Credit analyst Anthony Flintoff said the region's investment grade companies were expected to meet this sizeable debt funding challenge although credit markets remained skittish.
However the lending environment was now much tougher, he said. The cost of replacing that debt would be higher, and companies might have to strengthen the covenant protection they offered investors.
The report highlighted Fonterra, saying it had $6 billion of debt outstanding of which 40 per cent comes due this year.
"Fonterra is very well placed to meet this refinancing task due to its very strong liquidity; the combination of its undrawn committee bank facilities and cash balance exceeds the maturing amounts, so there is no necessity to tap the capital markets if it chooses not to."
The report noted that the collapse of markets for mortgage-backed securities and capital market bonds had forced many borrowers to turn to the banks for credit. This meant banking relationships were important, particularly as the banks found themselves constrained for capital.
For some borrowers without strong banking relationships, it would mean higher pricing and shorter tenures.
The report also said corporates with pending debt maturities or new debt funding requirements in 2008 needed to get their arrangements in place early.
"It would be a brave corporate treasurer who waits until the last minute to refinance."
Flintoff said that because capital markets were global now, Australian and New Zealand companies faced similar issues.
Fonterra was highlighted in the report only because of the large proportion of its debt coming due this year.
"The other New Zealand corporates like Telecom are in pretty good shape actually, so they didn't even make the detail there."