ASEAN company growth hinges on rising debt and credit availability: S&P

SINGAPORE - Major companies in ASEAN remain firmly on their growth Path, but they are increasingly financing a growing gap between cash inflows and investments, acquisitions and dividends, with debt -- and that could pose a risk, ratings agency Standard & Poor's says in a series of seven reports on the largest companies in the region released today.

The reports highlight S&P’s first survey of 100 of ASEAN's largest companies by market capitalisation, and discuss developments in
credit quality, leverage, capital spending, and corporate strategies in
anticipation of the 2015 ASEAN Economic Community initiative.

"ASEAN companies are increasingly using debt to finance growth and are likely to continue doing that over the next two years," said S&P credit
Analyst, Xavier Jean.

S&P estimates that internal cash flows and cash balances could fund only about half of almost US$300 billion ASEAN's largest companies spent
on expansion and acquisitions between 2008 and the first quarter of 2014.

In the same time, these companies issued about US$150 billion in additional debt to bridge the gap. The result of ongoing investment by ASEAN companies has weakened their credit profiles since 2011, when growth in revenues and cash flows started to wane, S&P says.

The ratings agency expects growth via acquisition outside the region to likely remain high on the agenda of ASEAN companies seeking to improve their international presence and counter stalling revenues and profits.

Acquisitions more than doubled for the 100 ASEAN companies between 2011 and 2012, stayed high in 2013 and are on track for a record year in 2014. www.standardandpoors.com (ATI).