Corporations Have a Debt Ceiling Too
- Joshua M Brown
- July 13th, 2011
Josh Kosman at the New York Post reminds us that the US Treasury's debt ceiling isn't the only one we're about to hit our heads on...
Uncle Sam isn't the only one who has maxed out on debt.
After issuing billions in junk bonds and loans, corporate America is also approaching its borrowing limit and will have trouble rolling over much of its riskier debt when the bill comes due in a couple of years, experts said.
An analysis reveals firms will have to refinance an eye-popping $1.2 trillion in the high-risk debt that allows companies with weak credit to stay afloat in 2012-17, according to MB Global Partners, a firm that specializes in distressed debt.
The analysis suggests that many firms will hit their debt ceiling starting in 2014, when a whopping $247 billion will need to be refinanced. They'll face similar daunting bills in 2015 ($217 billion), 2016 ($266 billion) and 2017 ($243 billion).
One of the few economic successes from all the quantitative easing and endless-zero interest rates has been the fact that the debt markets were not only unfrozen, they've become a thriving engine for capitalization and recapitalization. The main reason we've been able to get on with our lives post-Lehman has been the rejuvenated credit markets, not the rebound in stocks.
The eventual need to roll corporate junk bonds is not even on my top five list of things to be worried about at this point, but it's probably in my top ten.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.