Non-bank financial institutions (NBFIs) in the EMEA region are anticipated to face a gradual rise in refinancing needs throughout 2024, addressing substantial debt maturities in 2024 and 2025, according to a recent report by Fitch Ratings.
While most issuers appear equipped to manage upcoming maturities, the report underscores the potential strain on the business model resilience of lower-rated issuers due to significantly elevated funding costs since 2023.
Aggregate data from the report reveals that the covered issuers confront approximately EUR33 billion in debt maturities in 2024 and EUR49 billion over the combined period of 2024 and 2025. This compares to EUR38 billion in 2023 and EUR65 billion in 2023-2024. Notably, 18 out of the 52 issuers scrutinized in the report will need to refinance over 20% of their total outstanding gross debt in 2024.
However, a significant portion of the debt maturities in 2024 and 2025 is attributed to developed-market finance and leasing companies, enjoying the advantages of higher ratings or shareholder support, ensuring reliable access to the capital market. Conversely, investment managers and financial market infrastructure companies face less exposure to funding market dislocations.
Timely addressing of forthcoming maturities, even at a higher cost, is identified as crucial for issuers to maintain stable business models and funding profiles.
Fitch Ratings anticipates a continued increase in funding costs during the first half of 2024, despite the expected decline in interest rates by the end of the year.
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This scenario is likely to exert pressure on issuers’ business models, particularly impacting lower-rated issuers with untested models through a complete interest-rate cycle or smaller issuers with limited operating leverage.