Refunding risk is moderate for Canadian corporate issuers, suggests new research from Moody’s Investors Service Inc.

Canadian non-financial corporate issuers have US$29 billion of rated debt maturing from 2009 to 2011, Moody’s reports. This represents about 10% of all debt outstanding and much less than the $489 billion maturing over the same period in the U.S.

Moody’s study found that virtually all of the instruments maturing in 2009 carry investment-grade ratings and 90% have stable outlooks. Additionally, these maturities are not clustered together, but are distributed across the second, third and fourth quarters, at 23%, 33% and 44%, respectively, it notes.

Although market risk is currently elevated due to the ongoing financial crisis, Moody’s says that this is balanced by relatively low ratings-specific risk. “Ratings-specific risk is generally low, but is likely to increase as the recessionary environment continues to negatively affect issuers’ operating and credit profiles,” says Moody’s managing director, Don Carter. However, he said that refunding risk will be somewhat mitigated in the near-term by the quality of the maturing debt.

Additionally, Moody’s notes that Canadian domestic corporate issuance and cross-border speculative-grade bond issuance have ranged from $19 billion to $22 billion annually over the past few years. “This suggests that the average of about $10 billion of refinancing needs per year — over the study period of 2009-2011 — should be manageable with a return to more normal market conditions,” said Moody’s.

The ratings agency noted that it expects a sharp rise in the global speculative-grade default rate, predicted to peak at 13.8% in the fourth quarter of 2009 compared with 9.2% in May 2009. After hitting the peak, the rate is expected to decline to 8% in May 2010.