Asian Firms May Struggle To Refinance Dollar Debt, Ratio Suggests

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Asian companies are likely to find it harder to refinance dollar-denominated debt. The decline in a key metric suggests; with the currency at a two-decade high and a recent surge in inflation forcing central banks to raise interest rates.

The interest coverage ratio of these companies – a measure of how easily they can pay interest on outstanding debt slipped to 5.1; at the end of March, the lowest in a year, dragged down partly by firms in China, South Korea, Indonesia and Vietnam.

1,700 Asian companies (excluding financial firms) for which comparable data was available from Refinitiv. They had a combined market capitalisation of more than $1 billion.

Now, the ascending greenback and rising central bank rates are making interest payments dearer for smaller Asian firms; that do most business locally and do not have much exports to boost the value of their earnings.

Also, business conditions have deteriorated as raw material prices have jumped; and companies have struggled to pass the extra cost on to customers, squeezing margins.


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