The study, which expected at debt held by 1,200 U.S. companies, suggests companies will keep the bond offering market busy to raise cash and control spending to deal with looming debt maturities and refinancing needs, said Peter Fitzsimmons, AlixPartners’ president of North America.
“I think we have learned to realize this year that the financing markets can shift quite quickly,” Fitzsimmons said.
“The jury is still out as to whether the high yield and bond markets will continue to support this level of refinancing.”
Fitzsimmons said the credit markets did a “180-degree” turn last year, going from no activity to hyperactivity and that, while the credit market activity currently shows no signs of slowing, companies could easily face tighter conditions in the second half of the year.
“Mid-size and large companies are finding it easier to refinance now, but smaller companies are still finding it to be a very tough credit market,” Fitzsimmons said. “Bond offerings will be less available to smaller companies.”
Fitzsimmons, whose firm specializes in corporate turnarounds, said struggling companies will have to look at what they can do to generate more cash internally, make working capital improvements and focus on cost reductions to boost cash to pay off debt and make themselves more attractive to lenders who could help them refinance.
AlixPartners said it found in another study that 600 major companies in the UK, France, Germany and Italy are facing $569 billion of debt that will be up for refinancing this year as well.
All of this comes before what some turnaround experts call the “wall of debt maturities” from late 2011 through 2014, which could lengthen the line for refinancing. Many companies have also “rescheduled” their debt obligations this year, pushing them out to 2012 and beyond as lenders have been willing to amend and extend loans in recent months.
“My suspicion would be in the latter part of the year there will be a much tougher credit environment,” Fitzsimmons added.
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