Global high yield maturity runway
- You may have seen excitable commentators talking about the market’s impending “maturity wall”. While there are USD120 billion of bonds maturing in 2024, and another USD200 billion in 2025, we don’t see this as a looming issue for investors.
- The numbers above account for only c.14% of the global high yield market. Thanks to 10 years of very low interest rates, many corporates have been active in managing their maturities, tactically refinancing when lower rates were available.
- Some CCC credits may struggle to refinance their debt over the next 24 months because their leverage is too high for where we are in the economic cycle, with the era of ultra-low interest rates having come to an end, but the overall picture is in line with history. Indeed, we faced the same scenario last year, but 2023 didn’t come to a crashing end.
- We believe well-run high yield companies that have steady free cashflow, moderate leverage and healthy interest cover ratios, should be able to afford higher financing costs in 2024 and 2025. The key here is selecting those healthy credits.
- Our process combines the team’s extensive credit analysis expertise with advanced ESG integration processes to identify strong opportunities and avoid defaults.
- Overall, we believe the “maturity wall” is not a risk for high yield investors over the next 12-18 months. We believe the asset class offers an attractive overall yield and is set to benefit from both an improving economic outlook and the start of central bank interest rate cuts.
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