(Bloomberg) — Debt-heavy Asian companies are headed for a reckoning this year when $314 billion of bonds come due, just as refinancing costs for lower-rated firms have risen close to historic highs.Most Read from BloombergFirms from India’s Vedanta Resources Ltd. to stressed property developers such as China Evergrande Group have US-currency debt maturing in 2023, and in total it’s the biggest batch in the coming five years, Bloomberg-compiled data show.The risk is that surging borrowing costs may make it a challenge for companies with weaker credit ratings to raise funds to repay maturing debt. Financing costs for junk-rated dollar bonds in Asia hit their highest in at least a decade in 2022 though they’ve since pulled off that peak, Bloomberg-compiled data show. Moody’s Investors Service has warned that in its worst-case scenario, speculative-grade corporate defaults could quadruple globally this year.In Asia, Chinese property developers suffered a record number of defaults in 2022 while South Korea’s credit meltdown highlighted how quickly regional debt trouble occurring far from a nation’s financial center can spread to the broader market. While some signs suggest that the worst may be over for bond markets with corporate note spreads worldwide tightening sharply in recent weeks on bets that rate hikes will slow, uncertainties remain high.“Market liquidity and appetite for refinancing will be the key challenges in 2023,” said Jim Veneau, head of Asian fixed income at AXA Investment Managers Asia Ltd. in Hong Kong. China’s various efforts to support economic growth aren’t a “cure-all,” but primary bond market activity should pick up as a result of numerous and targeted property policies and the end of Covid Zero, he said.Story continuesWhile investment-grade borrowers from China’s leading technology firms to the biggest Japanese banks are unlikely to have much difficulty in raising funds, the spotlight will be on how their junk counterparts plan to pay back their creditors. About 22% of Asia’s US-currency notes due in 2023 are either junk grade with lower than BBB- equivalent scores or don’t have any credit ratings, according to Bloomberg-compiled data.From high-yielding debt of Chinese borrowers including stressed property developers to a scandal-ridden state-owned fund, here are some names to watch:Another area that the markets will closely watch are notes that give borrowers an option to repay them before the official maturity date, especially those issued by financial firms. A life insurer in South Korea triggered a selloff in Asian perpetual bonds late last year after it initially said it will delay the payment, though it later reversed that decision. Here are some of the biggest issues with call dates in 2023:©2023 Bloomberg L.P.
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