The Strategist

Experts: There can be a wave of bankruptcies among Asia-Pacific companies

03/24/2020 - 04:51

The outbreak of coronavirus COVID-19 could provoke a wave of bankruptcies among companies in the Asia-Pacific region (APR), which have increased their debt over the years of low interest rates, writes the Financial Times, citing analysts.

Scott Meltzer
Scott Meltzer
According to Moody's, from the time of the global financial crisis of 2008 to 2019, the amount of outstanding debt of companies in the region has doubled and reached $ 32 trillion.

According to FT, the PRC real estate market is of most concern. As of February, the debt of companies in this sector on bonds denominated in local or hard currencies amounted to $ 647 billion, according to Dealogic data.

One of the largest developers, Evergrade, has a debt of more than $ 100 billion. The company issued bonds with a coupon rate above 13%, which, according to analysts, raises concerns about the company's solvency. Experts believe that Beijing may have to support such companies. They note that Evergrade is a systemically significant company.

The smaller developer Tahoe Group has a debt of about $ 730 million in bonds maturing in the next 12 months. However, the company did not tell investors how it was going to pay it.

"The current level of operational failures is likely to inevitably lead to breach of obligations and defaults," said James Dilley, advisory partner at PwC in Hong Kong.

Companies in Thailand, in turn, are faced with complicated access to finance amid the impact of a decline in tourist flows to the country on the economy. Last week, Fitch Ratings reported that the asset quality and financial performance of Thai banks would deteriorate significantly this year.

The agency also noted the existence of risks for banks in Vietnam, which survived the banking crisis in 2012. “Banks don't have enough buffers in the event of significant economic damage,” said Fitch analyst Jonathan Cornish.

In Australia, amid an outbreak of illness, companies facing debt repayment problems are trying to raise capital. Travel company Webjet and advertising oOh! Media said on Friday, March 20, that they intend to urgently raise capital.