Global corporate net debt has fallen by 1.9% to $8.15 trillion in the past year. As higher borrowing costs reduce appetite for new financing and strong cash flows; from years of accommodative monetary conditions help companies repay existing debt, a study of 900 top firms released.
We expect indebtedness to decline by $270 billion in the coming year as companies take a more conservative stance; due to higher interest rates and an economic slowdown, according to the corporate debt index by investment firm Janus Henderson. It was based on the companies’ annual balance sheets as of June 1.
Policymakers around the world have injected trillions of dollars into the global economy to stem the impact of the COVID-19 pandemic. But with national economies rebounding and inflation soaring, central bankers have reversed their stimulus measures; which has raised the risk of a sharp economic slowdown.
Some borrowers in the corporate bond market have opted to redeem their debt instead of selling recent paper at higher costs; bringing the face value of listed bonds down by $115 billion since May 2021, Janus Henderson said.
The energy sector heavily influenced the decline in global corporate debt, the first since at least 2014/2015; as high prices led oil and gas firms to cut their borrowings by $155 billion on a constant-currency basis, the study found.
-Reuters.
