Friday, 22 January 2021

Moody's: Grim credit conditions for APAC corporates despite unprecedented relief measures

Moody's Investors Service said in a new report that the credit trends for Asia Pacific (APAC) corporates will remain negative in 2020, as the coronavirus pandemic has severely hurt the global economy, supply chains and consumer sentiment at a time when growth was already slowing.

"The uncertainty around when the pandemic will be contained and the pace of economic recovery will weigh on corporate earnings and credit quality for some time, with refinancing risk for weaker and highly leveraged companies likely to rise if debt maturities fall in times of stress," Moody's group credit officer and senior vice president Clara Lau said.

"Although the significant monetary measures initiated by governments will provide short-term liquidity relief for affected companies, the recovery of credit profiles hinges on the time it takes to control the disruptions, the measures that companies employ to preserve their liquidity and balance sheet, and how fast economic activity will recover," Lau added.

At the end of the first quarter (Q1) of 2020, 26% of the ratings in the Asia Pacific corporate portfolio had negative implications, up from 17% at the end of last quarter. Auto companies, retailers and gaming sectors are the hardest hit with over 50% of issuers having ratings with negative implications, meaning the ratings carried either negative outlooks or were under review for downgrade.

The rating trends for the APAC rated corporate portfolio were overwhelmingly negative with 120 negative and five positive rating actions in Q1 2020, predominately driven by the adverse impact of the coronavirus pandemic on different sectors and heightened refinancing risks for some companies.

Of the 120 negative rating actions, one-fifth of the negative rating actions were taken in the transportation sector (24), followed by automotive (18), energy (10) and real estate investment trusts (10).

Re-disseminated by The Asian Banker

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