Corporate debt maturities set to test US borrowers as rates rise

Sept 25 (Reuters) – A growing wall of US corporate debt is set to mature from 2027, putting pressure on companies to refinance borrowings raised ​at ultra-low interest rates during the pandemic.

About $4.3 trillion of non-financial ‌corporate bonds issued in US markets will mature between 2027 and 2031, a Reuters analysis of LSEG data showed. Annual maturities rise from about $572 billion in 2027 ​to roughly $1.03 trillion in 2030, after many companies pushed debt into ​later years through refinancing.

The challenge comes as global debt has ⁠climbed above a record $365 trillion, according to the Institute of International ​Finance, while higher Treasury yields have lifted refinancing costs across markets. The ​benchmark 10-year US Treasury yield is above 5%, around its highest level since 2007.

As the debt comes due, companies that locked in cheap fixed-rate funding earlier in the ​decade will increasingly have to refinance at higher costs, pressuring earnings and ​cash flow.

The burden will be heaviest for lower-rated borrowers. High-yield bond maturities jump from ‌about $68.5 ⁠billion in 2027 to $314.1 billion in 2029, according to LSEG, while investment-grade maturities increase to $512.6 billion from $437 billion.

High-yield debt will account for about a third of all maturities in 2029, up from 12% in 2027.

Bond fund ​manager PIMCO said ​most investment-grade and ⁠high-yield issuers should be able to absorb higher refinancing costs, but the weakest borrowers face a sharper squeeze. ​Coupons on CCC-rated bonds due in 2027 and 2028 ​could roughly ⁠double if refinanced at current index yields, it said.

The refinancing wave will coincide with heavy borrowing by major technology companies to fund artificial intelligence infrastructure. ⁠Goldman ​Sachs expects gross debt issuance by hyperscalers ​including Amazon, Alphabet, Meta, Microsoft and Oracle to reach $420 billion in 2027, up 60% from estimated ​2026 levels.