A total of 153 U.S. companies failed to repay debt
Highest in 7 years excluding pandemic period
“Credit deterioration continues to worsen globally this year”
Standard & Poor’s Global Ratings, an international credit rating agency, predicted that the number of defaults by U.S. companies increased sharply last year, and that this problem could continue this year as the burden of high interest rates continues.
According to CNBC on the 16th (local time), the number of U.S. companies that failed to repay debt last year was 153, an 80% increase from 85 the previous year. This is the highest in 7 years, excluding the COVID-19 pandemic period in 2020.
S&P said most of these companies were low-rated with negative cash flow, high debt burden and weak liquidity.
By industry, media and entertainment companies led these defaults.
According to the U.S. Federal Reserve (Fed), these companies have debt of $13.7 trillion (about 183 trillion won), so they may face difficult times in the future, S&P explained. The debt of these companies has increased by 18.3% since 2020 as they benefited from the Federal Reserve’s interest rate cuts in the early stages of the COVID-19 pandemic.
S&P said, “We expect credit deterioration to worsen globally this year, and approximately 40% of companies, mainly those with low credit ratings (B- or lower), are at risk of rating downgrade.” He continued, “Despite the outlook for interest rate cuts, we expect financing costs to continue to rise,” adding, “While companies are reducing debt maturing in 2024, most of the speculative grade debt (such as high-interest loans) will mature in 2025 and 2026.” “It looks like they will do it,” he added.
Some experts worry that a ‘corporate debt cliff’ could become a serious problem as much of the debt financed at very low interest rates approaches maturity in the next few years, CNBC reported.
S&P said, “Slowing economic growth and increased financing costs may increase the burden on the U.S. and the rest of the world,” and noted that vulnerable links due to the economic downturn are increasing in the consumer goods and retail industries along with the media and entertainment sectors. .
In addition, S&P added that problems may become bigger in the medical sector, which is suffering from increasing debt and manpower problems amid high interest rates.
The Federal Reserve’s interest rate cut is expected to alleviate this burden to some extent, but interest rates are expected to remain high until at least this year. The market believes that the Federal Reserve could cut interest rates by up to 1.5 percentage points this year, but Federal Reserve officials indicate that the pace of interest rate cuts will not be rapid.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.