Term · Risks & Red Flags
Refinancing Risk
In briefRefinancing risk is the danger of not being able to roll over maturing debt on time or only on worse terms. Small caps with less bank access and few bond-market options come under pressure more quickly as a result.
Definition
Refinancing risk is the risk of not being able to renew maturing debt on time or only on worse terms.
How it is calculated
Formula. Analysis via the maturity profile, interest costs, covenants, cash flow and market conditions.
Why it matters for small caps
Small caps often have lower bank access, fewer bond-market options and higher financing costs, which makes refinancing risks turn critical more quickly.
Common misreadings
- Refinancing risk is often seen only at loss-making companies, although profitable firms with maturity clusters can also be affected.
In the process
Frequently asked
What is refinancing risk?
It describes the danger of not being able to extend maturing financing, or only at higher cost. In the end this can lead to a liquidity shortfall.
How do you assess refinancing risk?
You look at the maturity profile, interest costs, covenants, cash flow and current market conditions together. This shows how easily upcoming debt can be renewed.
Does refinancing risk affect only loss-making firms?
No, profitable companies with maturity clusters can be affected too. A high profit does not protect against difficult follow-on financing.
Related terms
Sources
Primary
IFRS Foundation – IFRS 7 Financial Instruments: Disclosures
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-7-financial-instruments-disclosures/
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-7-financial-instruments-disclosures/
Methodology
Bundesministerium der Justiz – Handelsgesetzbuch (HGB)
https://www.gesetze-im-internet.de/hgb/
https://www.gesetze-im-internet.de/hgb/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.