Half of top 100 companies to refinance debt: Fidelity

Up to half of the top 100 companies on the Australian Securities Exchange (ASX) may need to raise capital on the ASX to finance their debt this year, according to Fidelity Investments' Australian equities fund portfolio manager, Paul Taylor.

“While many raisings have been presented to the local share market already this year there are still more to come,” Taylor told the third annual Fidelity Australian Equities Summit yesterday.

“When we examined the top 100 companies on the [ASX] last year we thought at least half of them may need to raise capital to refinance their debt this year.

“With the debt markets effectively closed and some overseas lenders no longer here to provide an alternative source of finance (for these companies), this effectively leaves the stock market and shareholders,” he said.

In addition, he said some companies “can’t continue to borrow money from the big four domestic banks, as several banks already have a decent exposure to the larger companies on the ASX".

He said the key to assessing whether to invest (in these companies) is to analyse the balance sheet of the company raising capital.

Is the capital raised going to be used to retire debt, to simply pay dividend or maybe acquire a good investment?

“Individual stock analysis and selection is critical,” he said. “This is an environment where the strong companies get stronger and the weak will get weaker.”

He said the Fidelity Australian Equities Fund was “focused on investing in industry leaders with strong balance sheets, quality management teams along with excellent and stable cash flows".