A $9T corporate debt bomb is 'bubbling' in the US economy

https://www.cnbc.com/2018/11/21/theres-a-9-trillion-corporate-debt-bomb-bubbling-in-the-us-economy.html

by paulpauper • 8 years ago

205 144 8 years ago

Debt with interest is inherently destructive. Inevitably the demand for debt owed exceeds the actually supply of money. To put it in very simple tangible terms, if the US economy was say $100,000, and say all that money is lent out at a simple 10% interest rate due back in one year, then a year from now the demand to be paid back is $110,000. Where is that extra $10k coming from? It doesn't exist. Lending with interest is designed to fail. The only "solution" is to keep printing more money.

manishsharan2• 8 years ago

I think you are implying the companies and people borrow money for shits and giggles. The reality is that most companies borrow money only when the availability of extra capital would help them generate more revenues or capture addtional market share. So they would take into account the cost of servicing the debt and repaying the loan.

However, there are cases like IBM raing debt to buy back shares and boost share prices. I have no idea how that will work out for them.

tboyd475• 8 years ago

True; but the revenue / additional market share is never a sure thing. The company can't make a contract with the universe. The interest payments, however, are a contractual obligation.

jaxtellerSoA6• 8 years ago

I think you are implying the companies and people borrow money for shits and giggles.

Nope. I was just using an example. It could have been $100k and only $50K was lent out. You sill would need $105k at the end of the year to satisfy all debts and have an equilibrium within the economy. Where is the extra $5K coming from? Magic??

The reality is that most companies borrow money only when the availability of extra capital would help them generate more revenues or capture additional market share.

This doesn't change the fact that the demand back for money will exceed the actually money supply.

It is simple math really. The fact that they are using the cash to, hopefully, generate more revenues is irrelevant.

Private companies have no control over the the supply of money. This is a central banking problem.

adrianN2• 8 years ago

The extra 10k is coming from the increased profits enabled by the investments that the 100k paid for.

jaxtellerSoA6• 8 years ago

The extra 10k is coming from the increased profits enabled by the investments that the 100k paid for.

Companies, and their profits, can't and don't create cash out of thin air. That isn't how the money supply works. This is a central banking problem.

stephen_g3• 8 years ago

You’re confusing stocks (such as the stock of debt) and flows (including payments), a common mistake. Every expenditure is another person’s income. Money is spent multiple times around the economy, and some agencies try to measure how quickly it happens, which is what the velocity of money is, and the concept of the fiscal multiplier comes into this.

If the economy is growing, it is true that continual money creation is required to stop deflation, but a lot of people don’t realise to what extent because it isn’t commonly known that not only can the Government create money, but that in fact all bank lending does and is expansionary [1].

1. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

davidverhasselt• 8 years ago

To stay in your simplified universe, consider just two entities, A and B. A has all $100K, B has $0.

- A loans $100K to B at 10%.

- B buys raw materials from A for $100K and creates products X and Y.

- A buys product X from B for $60K.

- B returns $60K to A.

- A buys product Y from B for $60K.

- B returns $50K to B.

A ends up with $90K and product X and Y. B ends up with $10K. At no step was money created out of thin air. Total supply still $100K.

You could simplify it some more by allowing B to pay back A using product X and Y instead of moving $60K around back and forth.

craigsmansion• 8 years ago

But A is in the money business, they should have no interest in X and Y.

- A loans $100K to both B and C at 10%.

- B makes X and Y, C make Q and R.

- B and C can produce and sell X,Y,Q, and R to one another to their mutual hearts content, creating a lot of value, but in the end A can only be satisfied by $220K. Either B or C is going to end up short.

Why would A accept X or Y when it's detrimental to their business interests to do so?

triviatise2• 8 years ago

this isnt really right.

Lets assume the product that B makes has a value which allows a 50% gross margin

A loans $100K cash to B at 10% markup (total value of system= 100K)

B buys raw material from A for 100K cash (total value of system now 200K as a magic 100K of raw materials were just added)

B creates product X and Y, now worth 200K (system is now at 300K)

A buys 60K of product X with cash (doesnt change value of system)

A cannot buy 60K of product Y with cash, though the total value of the system has increased.

There isnt enough cash in the system to settle all debts, but the total value of the system has increased. Cash would need to be printed to cover debts.

Fiat currency to some extent is balanced against the total GDP of the US.

jryan49• 8 years ago

Doesn't the interest come from the extra value that was created in the economy from that debt?

mathattack3• 8 years ago

Interest is determined by the risk inherent in the debt. Think of it in terms of consumer credit. Whether a bank or credit card company lends you money at 5% or 15% has more to do with how creditworthy you are, then with how good a use you will make of the money. (Think TVs on installment plans)

Nasrudith2• 8 years ago

Loans fundamentally create virtual currency in the first place. Not to mention that if the economy has the same amount of value a year from now something has gone very wrong here - an entire nation of people working and yet they don't have more or better?

It brings to mind a reducto ad absurdum of fixed currency amounts with massive deflation where your grandfather's couch cushion change is worth more than a new couch as why absolute fixed currencies are unviable.

dragonwriter3• 8 years ago

Where is that extra $10k coming from?

Spending money doesn't destroy it, it can be spent more than once in a year; even with no additional money, you just need higher velocity of money for their to be more money spent in one year than another. The extra $10K doesn't need to come from anywhere, the same way the base $100K (which was already spent the first year and thus "consumed" if you mistakenly assume money is single-use) doesn't.

imtringued• 8 years ago

The interest doesn't disappear, it lands in the pocket of the lender, only the principal does disappear.

If you do indeed lend 100k$ from a central bank and they "print" the money then the money supply increases by 100k$ for the duration of the loan. When you pay it back the money vanishes into nothingness again. Interest payments go to the central bank which makes a profit, governments spend the income and the money starts circulating within the economy again. [1]

[1] https://www.ecb.europa.eu/explainers/tell-me-more/html/ecb_p...

time-domain02• 8 years ago

Sorry, but it's a doomsayer, tinfoil hatters' failure to understand MMT. Here's one of Bernie Sanders' economic advisers explaining it:

https://youtu.be/5baKgv7Zl5g

http://www.usdebtclock.org

C1sc0cat• 8 years ago

Exactly its how expensive the debt is that's the main issue

syntaxing• 8 years ago

NPR's explanation is much more digestible: https://www.npr.org/sections/money/2018/09/26/651948323/epis...

jasode• 8 years ago

, tinfoil hatters' failure to understand MMT.

I wasn't the one who downvoted you but as a fyi... this particular article is about corporate debt. MMT is about government debt.

When non-government entities such as businesses and consumers take on too much debt that they can't service, bad economic things happen.

time-domain02• 8 years ago

Obviously, Sherlock. The govt with the Fed are (or should be, if things don't spiral out of control) the economic governors. You can't talk about either one in isolation because they are symbiotic, not mythologically-utopian, hermetically-closed model boxes that can exist without the other.

The Fed will be pressured to reduce interest rates because corporations are playing Russian roulette too-big-to-fail brinksmanship and will expect a bailout as per usual.. an action the majority undertake will always be excused in a democracy because of political pressure.

zozbot123• 8 years ago

Heck, when government entities take on too much debt, the bond vigilantes get involved, interest rates spike upwards and bad economic things happen! Inflating your debt away will just save you from outright sovereign default - it won't save you from the bond vigilantes and from spiking nominal rates.

stephen_g3• 8 years ago

MMT still has plenty to say about the private sector, as well as non-monetarily sovereign monetary systems, etc. It’s the common fiscal policy recommendations informed by MMT that mostly have to do with Government debt. It’s important to separate the theory from the policy - MMT is way more than just overt-money financing.

But yeah, the parent comment is confused, corporate debt (and private debt in general) is the real looming threat to worry about in a currency-issuing country that only issues bonds denominated in their own currency (such as the US) - not the Government deficit or debt.

gadders• 8 years ago

>Here's one of Bernie Sanders' economic advisers explaining it

Let me stop you right there.

apo• 8 years ago

Over the past decade, companies have taken advantage of low rates both to grow their businesses and reward shareholders.

Total corporate debt has swelled from nearly $4.9 trillion in 2007 as the Great Recession was just starting to break out to nearly $9.1 trillion halfway through 2018, quietly surging 86 percent, according to Securities Industry and Financial Markets Association data. Other than a few hiccups and some fairly substantial turbulence in the energy sector in late-2015 and 2016, the market has performed well.

"Reward shareholders" is code for stock buybacks - the practice of a company using ultra-low interest financing to buy its own stock on margin. It's an unsustainable way to manipulate the price/earnings ratio, and thereby make a company look like a better buy than it is.

Buybacks in turn have been a major source of funding for the stock market's unprecedented run:

https://seekingalpha.com/article/4156578-buyback-bubble-will...

I suspect those looking for a soft landing here haven't considered the reversible nature of this debt-fueled stock market rally. Nor have they considered the amplifying effect of debt on the upside and downside.

eej713• 8 years ago

I do not believe share repurchase programs are done "on margin".

tcoppi• 8 years ago

If they borrow money to purchase the stock that's effectively what it is, a margin loan.

gomox• 8 years ago

If the buyback is funded with credit, it's done on margin. I'm not sure how prevalent that has been during the last bull run.

TheSoftwareGuy• 8 years ago

Nor does "reward shareholders" necessarily mean stick buybacks. It could just as easily refer to paying out dividends.

gruez• 8 years ago

considering money is fungible, you could make the case that any buyback done close to a loan could be construed as being "on margin"

shaki-dora4• 8 years ago

I don’t believe it’s fair to call the practice “unsustainable” without qualifications.

It’s just the opposite of issuing stock. Even when done with borrowed money, it is simply replacing one source of funding (investment) with another (debt). When interest rates are low, the latter becomes attractive. If/when they rise, trouble may ensue. But for a profitable company, the normal, entirely adequate, reaction would just be the reverse transaction, retiring the remaining debt with newly issued stock.

freehunter6• 8 years ago

It's an unsustainable way to prop up a share price in a declining market. The market could stay in decline longer than you can stay fiscally solvent.

mtgx• 8 years ago

I think doing this points to a dysfunctional system.

You're betting that your company's financials and stock price will improve, so you get debt to buy back the stock. It's no different than an individual getting into debt to buy say Nvidia stock because they think the price of the stock will keep rising. This is always a mistake in the long term, and it should be discouraged - for both individuals and companies.

It's even worse when you see companies like Apple with tens or hundreds of billions of dollars in cash getting debt to buy back its stock. Come on. This is a disaster waiting to happen. We shouldn't have to wait until the economy slows down/a recession arrives to figure this one out. It's clearly dysfunctional/a bad thing to have in an economy.

SilasX• 8 years ago

Mostly agree, but I don't like the characterization of stock issuance as being just as easy as stock buyback.

freehunter6• 8 years ago

I keep an eye on a lot of tech stocks, and I think it's crazy how much crap companies like IBM and Oracle got 3-5 years ago for their stock buybacks [1] contrasted to how praised stock buybacks are now [2]. The impact back then was the market was great but IBM/Oracle/etc's share prices weren't doing great. The impact now is the market is not doing great, and stock buybacks are a band-aid over the inevitable decline.

Anyone who doesn't see that is going to be caught off guard when the money runs out, the buybacks stop, and the market crashes "overnight". In reality, the market is crashing right now, it's just hidden behind trickery designed to artificially inflate the value of the market. It's like if I lost my job but kept financing my same lifestyle out of my savings account. Eventually that savings will run out and reality will hit like a ton of bricks, and no one will have seen it coming.

[1] https://www.fool.com/investing/general/2014/12/05/share-buyb...

[2] https://www.fool.com/investing/2018/12/09/why-investors-shou...

shaki-dora4• 8 years ago

I think you are operating from a seriously mistaken assumption of how stock buybacks work.

When a company buys their own stock, there are simply fewer shares free-floating, in the hands of owners. The company's profits therefore are divided among a smaller group, and each share receives a larger percentage of those profits.

Imagine an extreme case where McDonald's buys every single share but one. That remaining stock-owner will therefore own 100% of McDonald's, and get every last profit made from the world's obese.

All this requires no ongoing buybacks from the company. You do it once, and because the denominator shrinks, each stock appraises. After that, as long as profits remain stable, earnings per share will, and so should, absent external factors, the stock price.

AJ007• 8 years ago

As others have pointed out, it is important to evaluate these actions on a company by company basis. On the other hand, if you invest in index funds, then the proportion of who is doing them and why matters a lot.

The worst case scenario is a company with declining market share, that is cash flow negative, and is buying back shares with debt because the executives set their bonuses based on an earnings per share target.

I strongly suggest novice investors is to look at shares outstanding for a company over time. Just as one could claim share buybacks mask a companies problems, you can make a case that issuing new shares steals money from existing shareholders. Indeed, there are public companies which have been around 10+ years and stay afloat solely by creating new shares and have generated 0 return for long term shareholders.

pmart1234• 8 years ago

Companies with low growth have a few options (assuming strong cash flow).

1. Distribute cash back to shareholders via buybacks or dividends

2. Increase R&D spending on new initiatives

3. Acquisitions

Buybacks are at least much more tax effective than issuing dividends. Large acquisitions tend to fail and I imagine it could be hard for an established company to regain the "growth mindset" of a startup.

Should a company load up on debt or pursue buybacks way above intrinsic value? Probably not. But, if a company is paying a 4% dividend, and can borrow at 3.5%, buying back stock reduces the dividend payout, and the company avoids lowering the dividend per share (something that is considered sacrilegious in America).

neffy• 8 years ago

@freehunter Yes, you were and are quite right. We´re looking at a feedback loop not entirely dissimilar to the one that caused the '29 crash. Only then it was corporates lending to banks to lend to investors to buy shares. I guess this one is a little more direct.

ptero• 8 years ago

I personally think there are many reasons to be super careful and expect significant glitches in the economy, stock and especially bond markets, etc. in the next few years. We (US) have been on the up leg of the cycle for very long and a lot of people are used to great paper returns and a feeling of wealth that comes with it. They are also not ready for a change and few entertain "what if" scenarios -- kind of like 2006 when professionals were stretching to buy expensive houses on 2 salaries and would argue "no problem -- if one of us loses a job we will sell the house. price dropping 20%? never going to happen".

That said, I also do not see "reward shareholders" as necessarily sinister. Many companies this late in the cycle are sitting on a LOT of cash (income from operations) and do not see enough opportunities to invest in long term growth. Thus they are using it to pay dividends or buy their own stock. In fact, "reward shareholders" is exactly what the company should be doing in such case and neither of this is a sign of the problem. Problems may still happen, but I doubt about buybacks being the primary cause. My 2c.

sonnyblarney• 8 years ago

It's fair to separate the issues of borrowing and stock-buybacks ... specifically because the borrowing has to be based on the credit worthiness of the company, and the stock-buybacks are a separate thing entirely.

Using debt instead of equity is a rational thing for companies to do if debt is really cheap.

The 'higher stock price' as a result of the buybacks is effectively an adjustment of the equilibrium to that fact: the company is taking advantage of cheap sources of financing.

If the company is doing sneaky things like hiding problems, or if the lenders are failing to do due diligence .... then yes, this can be a problem.

Or of companies are over-leveraging - again a potential problem.

But tapping into cheap debt, even combined with stock-buybacks - this could definitely be characterized as an intelligent kind of financial engineering, I don't think that it should be in and of itself viewed as suspicious or negative.

It's just the CFO doing their job, mostly.

Also ... stocks are quite expensive right now by most measures, so I'm not sure how much buybacks make sense in that context at this moment.

bogomipz3• 8 years ago

""Reward shareholders" is code for stock buybacks - the practice of a company using ultra-low interest financing to buy its own stock on margin."

I'm curious why this would be done on margin. Are they using call options then for their own stock?

paulpauper2• 8 years ago

There's one worrying trend where companies on the edge of the investment-grade universe lose their standing and turn into high-yield or junk, sending rates — and defaults — significantly higher. And there's a more positive case where the U.S. continues to outperform the rest of the world and corporate debt problems are limited to overseas and specific companies that aren't systemically important.

My money is literally on the optimistic outcome. Just check old headless from 2009-2017 of all the failed predictions of crisis. Odds are nothing will happen. Profit margins for multinationals are at historic highs. Bondholders of investment-grade debt should have little to fear. Junk debt however is riskier obviously and would avoid it.

moorhosj3• 8 years ago

==Just check old headless from 2009-2017 of all the failed predictions of crisis.==

You could just as easily check the old headlines from 2006-2008 that told us we were in a "Goldilocks" economy and would live in an endless bull market.

paulpauper2• 8 years ago

but there are far more failed predictions of crisis than failed predictions of prosperity and growth. A broken clock is right...

jondubois2• 8 years ago

Maybe those big profit margins are paid for with debt. Multinational corporations are extremely innefficient, so I wouldn't be surprised is reality catches up with them eventually. Corporations are good at capturing money from the economy but they suck at creating value.

unethical_ban2• 8 years ago

Do bombs bubble?

Why not "bubble is growing"?

"Volcano is bubbling"?

"Bomb is ticking"?

mattmar96• 8 years ago

Bubble is a commonly used term in financial circles

https://en.wikipedia.org/wiki/Tulip_mania

unethical_ban2• 8 years ago

I mean, yeah, but then it's not a bomb.

My comment is lighthearted - I'm just saying they mixed metaphors.

jarsin• 8 years ago

Do bombs bubble?

Yes baking soda and vinegar put in plastic bag and watch bubbles till it explodes.

roymurdock2• 8 years ago

here's a much better article on the subject of corporate debt [1]

basically the total amount of corporate debt has jumped, but corporate debt defaults have also decreased sharply

aka corporate debt has become safer, and investors are buying it up because it has been relatively safe and provided attractive returns

if interest rates begin to rise, corporate debt defaults could start increasing, potentially severely. mass defaults could trigger another crisis

"New McKinsey Global Institute research finds that one-quarter of corporate bonds in Brazil, China, and India are from companies that are already at higher risk of default even at today’s low interest rates.

If interest rates were to rise by 200 basis points [2%], that share could rise to as much as 40 per cent. In advanced economies, most corporate borrowers are in good financial shape, but there are pockets of acute vulnerability, for instance, among speculative-grade borrowers, and in certain sectors like energy and retail...

Is the next global financial crisis at hand? We do not think so. Unlike the subprime mortgages that sparked the previous financial crisis, defaults in the corporate bond market are unlikely to have significant ripple effects across the system.

While mortgages were packaged into securitised assets and multiple layers of synthetic securities were built upon them, the same is not true of corporate bonds. Losses will therefore be sustained by the direct bond owners, but the systemic risks seen in the previous crisis are minimal."

i agree, and a 2% increase in interest rates doesn't seem anywhere near possible with today's current combination of low productivity growth, low global capital demand, and easy liquidity (granted QE is starting to wrap up in the EU at least and the US is toying with the idea of raising rates against Trump's will)

of course this is a McKinsey economist/investment manager somewhat talking their book, so draw your own conclusions, but the FT article on the state of the corporate debt is much more well-researched and written

PS subscribe to and read the FT, you won't regret it. this CNBC coverage is complete garbage

[1] https://www.ft.com/content/bc1d327a-91c1-11e8-bb8f-a6a2f7bca...

arethuza• 8 years ago

"defaults in the corporate bond market are unlikely to have significant ripple effects across the system"

Is there any reason to believe that we have got any better at understanding these kind of effects than before 2008? A lot of people were thinking they were safe in 2008 only to find out that they were just as doomed as everyone else.

talltimtom• 8 years ago

are unlikely to have significant ripple effects across the system.

Was said about the mortgages too.

mathattack3• 8 years ago

The market cap from US companies has grown from 19 to 32 trillion in the same period. [0]

It’s not accurate to look at single variables in isolation. Problems happen when the aggregate debt in an economy exceed the assets behind them, or the capacity to pay them down. [1] If we are there it’s because of govt and consumer (mortgage) debt. On the corporate side I think it’s just balance sheet efficiency. (Can write off debt payments)

[0] https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?start=20...

[1] https://en.m.wikipedia.org/wiki/Minsky_moment

roymurdock2• 8 years ago

An increase in interest rates ~2% could trigger a large number of junk corporate bond defaults, according to the latest McKinsey analysis

The trigger for interest rates rising by that much in a short period of time is not apparent and/or explored in the article, and frankly I don't see one, but that would be the real worry, and would probably have a large, negative effect on junk government bonds as well

https://www.mckinsey.com/business-functions/strategy-and-cor...

Novashi• 8 years ago

Of course another variable is whether there will be another bailout if this goes off.

lotsofpulp• 8 years ago

Considering how many wealthy (and not so wealthy) voters are invested in large public corporations, I assume bailouts will happen.

Jimpulse2• 8 years ago

What if the market cap is fueled by the corporate debt? Doesn't that strengthen the article's position?

revel• 8 years ago

Overall corporate debt levels are at record highs, but the bigger problem is highlighted in the article -- the quality of debt has degraded substantially. There are a ton of companies that have been skating along at BBB/BBB- (in S&P parlance) on the brink of junk bond status. If they get downgraded mutual funds have to dump them. This creates downward pressure on debt and makes it harder for those companies to refinance. In turn, this pushes up credit spreads. This is a viscous cycle and it's going to be extremely nasty for anyone holding either high yield debt or equities. That's the debt bomb that should worry investors.

Since we're on HN, this will also make it far harder for entrepreneurs to raise money since there's now a ton of competing high yield debt opportunities for investors to take advantage of. If anyone wants to dump a few million into a really awesome startup before that happens, let me know!

aphextron4• 8 years ago

I've come to realize that debt (at the macro level) really doesn't matter at all in our system. In fact higher levels are better because it means people are doing business. It's a completely different thing than personal debt. The direct cause of the depth and breadth of the Great Depression was seeing money as a "thing" that actually exists and must be conserved, rather than the fed QE policies of Bernanke, which saved us during the Great Recession. If anyone can point to a place where a sovereign democracy with reserve currency status ever went bankrupt or suffered ill effects from too much debt, I'd like to see how that worked.

Gustomaximus2• 8 years ago

If anyone can point to a place where a sovereign democracy with reserve currency status ever went bankrupt or suffered ill effects from too much debt

Plenty of them: https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises

aphextron4• 8 years ago

Plenty of them: https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises

Reserve currency is the key word here.

Sovereign nations operating within the global financial system can certainly go bankrupt. But all US debt is denominated in US dollars. It's technically impossible for us to go bankrupt. In fact, you could argue that almost every single modern debt crisis on this list was only possible because of us, and enriched us at the defaulting country's expense. They are almost entirely fueled by foreign debt held in, you guessed it, USD.

tabtab• 8 years ago

That's an interesting theory, but if you are wrong, really bad things can happen, such as global war. And even if we survive a debt-induced crash, currency-related investors won't trust us afterward. I'd sleep better at night if we kept debt under control, and I'm sure investors would also.

BenoitEssiambre3• 8 years ago

It's not that debt doesn't matter. It does. But at the macro level, it works in counter intuitive ways mostly because of the fact that every dollar of debt is someone else's saving (the person the debt is owed to). If you reduce debt by $1T you necessarily reduce savings by $1T. Whether this is good or bad depends on finer details that are rarely discussed in internet forums and that seem only to be fully grasped by the best economists.

dogcomplex• 8 years ago

I don't suppose you could give us a detailed example of some particular company's/country's debt situation? (Just, since it's rare to find people who can explain that depth)

jondubois2• 8 years ago

I am eagerly awaiting the next bubble. I hope it will be the worst since the great depression. I will probably lose my job but that's OK - It will be worth it; all the bankrupt corporations and the jailed executives will need replacements which means more opportunities for everyone else.

Sileni• 8 years ago

Did you sleep through 2008? Only poor people experience recessions now. Corporations put up record profits.

known• 8 years ago

The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP)[a] as of Q1 2014.

https://en.wikipedia.org/wiki/Financial_position_of_the_Unit...

gammateam• 8 years ago

Corporate bonds mature and the principle is paid back. Unlike publicly traded stock, the bond asset never has to be sold on the open market to get rid of it so this part isnt a concern.

If there is a threat that the corporation cannot pay back, or if the corporation merely feels like it, they will issue new bonds and use the proceeds to pay back old ones. Yes it is exactly what it sounds like and there is enough investor appetite for it.

When the corporation’s bond offerings are no longer investment grade then there is less of a chance of their being investor appetite for a future bond rollover and the corporation should try to pay the existing bond.

Therefore the SIZE of the corporate debt outstanding is only clickbait.

This article talks about how there are signs that some companies historically wouldnt be able to tap into bond investor appetite to issue new bonds to cover their cash shortfalls on current bonds. Investor appetite may still be there or the company puts more resources into paying back current bonds in full before they mature, YEARS from now.

Notably this article didnt talk about maturity dates.

carapace• 8 years ago

Economics is ecology + psychology.

A $9T corporate debt bomb is 'bubbling' in the US economy

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