{"id":24531,"date":"2017-07-30T16:50:50","date_gmt":"2017-07-30T21:50:50","guid":{"rendered":"http:\/\/olduvai.ca\/?p=24531"},"modified":"2017-07-30T16:50:50","modified_gmt":"2017-07-30T21:50:50","slug":"zombie-corporations-litter-europe-kept-alive-by-ecb","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=24531","title":{"rendered":"Zombie Corporations Litter Europe, Kept Alive by\u00a0ECB"},"content":{"rendered":"
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Zombie Corporations Litter Europe, Kept Alive by\u00a0ECB<\/a><\/h3>\n<\/header>\n
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Bank of America says 9% of European firms have subpar interest coverage. Bloomberg covers the story in its report\u00a0Zombie Companies Littering Europe May Tie the ECB\u2019s Hands for Years<\/a>.<\/span>
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Watch out for the zombies.<\/p>\n

The plethora of companies propped up by the European Central Bank will limit policy makers\u2019 ability to withdraw monetary stimulus that\u2019s been supporting the continent\u2019s bond market since the financial crisis, according to strategists at Bank of America Corp. About 9 percent of Europe\u2019s biggest companies could be classified as the walking dead, companies that risk collapse if the support dries up, according to the analysts.<\/p>\n

\u201cMonetary support in Europe over the last five years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults,\u201d analysts led by Barnaby Martin wrote in a note Monday. \u201cThis supports the point that our economists have been making: that the ECB will likely be very slow and patient in removing their extraordinary stimulus over the next year and a half.\u201d<\/p>\n

The strategists classify zombies as non-financial companies in the Euro Stoxx 600 with interest-coverage ratios \u2014 earnings relative to interest expenses \u2014 at 1 or less. The thinking goes that companies in this category are particularly vulnerable to rising interest rates.<\/p>\n

The ECB\u2019s dovish tone last week \u2014 pushing back the timing for a decision on the future of its bond-buying program until possibly October \u2014 confirms it will embark on a gradual pace of tightening in order to juice the economic recovery, according to Bank of America. It reckons the ECB\u2019s taper will start in January 2018, with the first increase to the deposit rate projected in the spring of 2019, compared with consensus expectations for a hike in October 2018, according to overnight index swap contracts compiled by Bloomberg.<\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Zombie Corporations Litter Europe, Kept Alive by\u00a0ECB Bank of America says 9% of European firms have subpar interest coverage. Bloomberg covers the story in its report\u00a0Zombie Companies Littering Europe May Tie the ECB\u2019s Hands for Years. Watch out for the zombies. The plethora of companies propped up by the European Central Bank will limit policy […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[83,233,281,282,14576,7866],"class_list":["post-24531","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bloomberg","tag-ecb","tag-europe","tag-european-central-bank","tag-mike-shellack","tag-zombie-corporations"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24531","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24531"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24531\/revisions"}],"predecessor-version":[{"id":24532,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24531\/revisions\/24532"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24531"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24531"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24531"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}