S&P Warns of EM Company Defaults With $47 Billion Due Annually

S&P Global Ratings warned of the risk of company defaults in emerging markets, as firms struggle to stomach higher funding costs.

(Bloomberg) — S&P Global Ratings warned of the risk of company defaults in emerging markets, as firms struggle to stomach higher funding costs. 

Debt maturities in EMs, excluding China, will average $47 billion from 2024 to 2027, compared with $20 billion this year, according to data obtained from S&P.

“Issuer competition for liquidity will be fierce in the next two years,” S&P analysts led by Elijah Oliveros-Rosen wrote in a report published on Wednesday. “It is highly unlikely that issuers will wait until 2025 to refinance, and they will probably tap the market in 2024 with interest rates still high. These conditions could be unsustainable for many issuers, leading to defaults and bankruptcies.”

Higher-for-longer interest rates, slowing global growth and a strong dollar will put more pressure on the weakest firms. Latin America is the pressure point in EMs, with the region accounting for 13 of the 14 corporate defaults as of August, S&P said in September.

Average borrowing costs for high-yield EM issuers in dollars climbed to their highest since November 2022 this week at about 11.8%, according to a Bloomberg index. 

–With assistance from Finbarr Flynn.

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