‘Wall of Debt’ of $2 Trillion a Struggle to Refinance

Companies in the U.S. will struggle to refinance a $2 trillion “wall of debt” maturing over the next five years as banks grapple with lending restrictions of their own, according to Standard & Poor’s.

“Most of this debt was issued during the period of 2004 to 2007 when the bank and high-yield bond markets were very robust,” John Bilardello, S&P’s global head of corporate sector ratings, said on a teleconference call from New York. “There’s a serious question over whether the securitization market will come back and whether banks will be able to lend to the extent they did several years ago.”

U.S. banks, still reeling from $1.15 trillion of writedowns and losses, are being forced to shrink their balance sheets and increase the capital they must set aside to offset the risk of losses in an attempt to avoid a repeat of the global financial crisis. The Basel Committee on Banking Supervision proposed changes in December that would require lenders to increase the amount of equity and retained earnings they hold by 2012. (more)