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Sunday, 18 December 2011

Emerging borrowers face rollover risk in 2012

Scarce dollar funding and a retrenchment in bank lending will force up premiums for emerging market countries and companies refinancing debt next year, adding to strains on public finances and potentially triggering a surge in corporate defaults.
JPMorgan calculates that emerging sovereign debtors will need to find $63.6 billion to cover coupon and redemption payments in 2012, while corporates must raise $107 billion. Total issuance should be around $245 billion, the bank forecasts.
Such volumes would not usually portend difficulty — even this year, emerging bond issuance has been over $250 billion, not far off last year’s record. But with markets still awaiting a solution to the euro zone’s debt crisis, 2012 could be tough for entities that need to refinance debt, or secure new money.