Corporate debt "wall of maturity" crumbling: study

NEW YORK (Reuters) - Financial markets are knocking down a wall of debt maturity that has endangered the U.S. economic recovery and threatened to push more companies into bankruptcy, according to an investment firm report on Tuesday.

Companies must refinance about $400 billion in debt over the next five years, according to Morgan Joseph LLC's second-quarter financial restructuring outlook. The specter of companies defaulting en masse has worried investors even as bankruptcy attorneys have geared up for a busy few years.

But that mountain of debt has shrunk by more than 25 percent over the last two years as lenders agreed to extend favorable terms rather than forcing repayments. It is expected to crumble more as companies including formerly bankrupt plastics maker LyondellBasell Industries NV have sold high-yield "junk" bonds to raise cash to repay loans.

"The maturity wall may not be the doomsday liquidity event once projected," the investment firm said.

In the last 18 months, loans due in 2011 have been almost entirely addressed, the firm said. Loans due the following year have been cut in half, it said.

Still, the problem may have just been delayed for a few years, said James Decker, head of the firm's financial restructuring group, in an interview.

"The wall of maturity is out there -- it's just been pushed down the street," said Decker.

Companies require new capital in addition to financing debt. An absence of new money could crimp broader economic development.

"As long as the economy is in a deleveraging mode, you're going to be in a period of generally flat economic performance," he said.

(Reporting by Chelsea Emery; editing by Robert MacMillan and Matthew Lewis)