The coronavirus outbreak is threatening to force companies across the Asia-Pacific region to default after years of low interest rates prompted many to gorge on trillions of dollars of debt, reported the Financial Times.
In the years following the global financial crisis to 2019, the volume of outstanding corporate debt issued by companies in the region doubled to $32 trillion, according to Moody’s, a rating agency.
The coronavirus pandemic has sparked a cash crunch that investors fear will cause a wave of bankruptcies in industries from airlines to retail. “It’s a little bit crazy out there and there are very few sectors that are protected from this,” said John Park, a Brisbane-based managing director at restructuring firm FTI Consulting. “We are seeing an immediate uptick in inquiries from firms seeking advice on how to prevent a potential insolvency event.”
Among the areas causing particular concern is China’s property market. As of February, the industry owed a total of $647 billion in bonds denominated in local and hard currencies, according to Dealogic data.