I’m been laughing at the 2012 doomsayers for the past year. It’s just a date, I would say – what’s so special about it? Well, maybe 2012 is something to worry about after all. I just read this article in the New York Times, and I find myself being a little nervous.

Apparently, there will be a avalanche demand for credit as many corporate notes become due in 2012 and 2014. The problem is corporations wanted to get into seemingly attractive investments when things were good in 2007, and borrowed on 5 to 7 year notes in order to buy these high-yield bonds. It’s similar to investing in the stock market when an investor borrows money on margin to purchase stocks.

The note is again a form of derivative that took down the sub-prime mortgage market in 2007 and 2008. Called a collateralized loan obligation, this financial instrument helped issuers repackage corporate loans much as sub-prime mortgages were sliced, diced and then resold to other investors.

The terms of the notes were amortized over a fixed number of years (let’s say 15), but had balloons due in 5 or 7 years. Beginning in 2012, these corporations will have notes coming due for billions of dollars, and there will be a lot of competition for any available credit to refinance the debt.

If no credit can be found to refinance these notes, there will be massive default on a scale which will dwarf the mortgage crisis.

It’s not just corporations who borrowed using these kinds of instruments – the US borrowed massive amounts of money in order to pay their bills:

The United States government alone will need to borrow nearly $2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt. Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.

The result is a potential financial doomsday, or what bond analysts call a maturity wall. From $21 billion due this year, junk bonds are set to mature at a rate of $155 billion in 2012, $212 billion in 2013 and $338 billion in 2014.

Who has the cash to lend all of this money? That’s part of the problem. The other part: the credit market is still tight, and companies needing to refinance risky debt will be competing with a raft of better-rated borrowers that are expected to seek buyers of their debt at around the same time.

The main competitor: the US government. Washington will actually have to borrow $1.8 trillion in 2012, because $859 billion in old bonds will come due and have to be refinanced in addition to the deficit. By 2013 and 2014, $1.4 trillion will have to be raised annually.

I hate to be a Chicken Little, but let’s say I’ve gotten skittish in regards to all things financial in recent years. How about you? Let us know by leaving a comment!

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