{"id":52157,"date":"2020-04-03T14:22:25","date_gmt":"2020-04-03T19:22:25","guid":{"rendered":"https:\/\/olduvai.ca\/?p=52157"},"modified":"2020-04-03T14:22:34","modified_gmt":"2020-04-03T19:22:34","slug":"a-corporate-debt-reckoning-is-coming","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=52157","title":{"rendered":"A Corporate-Debt Reckoning Is Coming"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.zerohedge.com\/markets\/corporate-debt-reckoning-coming\">A Corporate-Debt Reckoning Is Coming<\/a><\/h3>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/1_EgAAj88dvOk2ChB9PwmuAg.jpeg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Corporate debt is the timebomb everyone saw ticking, but no one was able to defuse.&nbsp;<\/strong>Ratings agencies warned about it: Moody\u2019s, S&amp;P. Central banks and international financial institutions did too: the Fed, the Bank of England, the Bank for International Settlements, the IMF. Financial luminaries expressed concern: Jamie Dimon, Seth Klarman, Jes Staley, Jeffrey Gundlach, Henry McVey. Even a presidential candidate brought the issue on the campaign trail: Elizabeth Warren. Yet, as we\u2019ve documented in these pages for more than two years, corporations have only piled on more debt as their balance sheet health has deteriorated.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Total U.S. non-financial corporate debt sits at just under $10 trillion, a record 47% of GDP.&nbsp;<strong>One in six U.S. companies is now a zombie, meaning their interest expenses exceed their earnings before interest and taxes.&nbsp;<\/strong>As of year-end 2019, the percentage of listed companies in the U.S. losing money over 12 months sat close to 40%.&nbsp;<strong>In the 12 months to November, non-financial S&amp;P 500 cash balances had declined by 11%<\/strong>, the largest percentage decline since at least 1980.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>For too long, record-low interest rates inspired complacency<\/strong>, from companies to lenders to regulators and investors. As we warned in&nbsp;<em>WILTW&nbsp;<\/em><a href=\"https:\/\/www.13d.com\/articles\/wiltw-2019-08-08-e02-the-growing-threat-of-a-corporate-bond-market-meltdown-these-things-don-t-happen-overnight-for-companies-they-happen-overnight-only-for-investors\/\">August 8, 2019<\/a>,&nbsp;<strong>corporate fundamentals will eventually matter.&nbsp;<\/strong>Now, with COVID-19 grinding the global economy to a halt,&nbsp;<strong>that time has come.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Systemic threats are littered throughout the corporate debt ecosystem.\u00a0<strong>Greater than 50% of outstanding debt is rated BBB, one rung above junk.<\/strong>\u00a0As downgrades come, asset managers will be forced to flood the market with supply at a time demand has dried up. Meanwhile, leveraged loans \u2014 which have swelled by 50% since 2015 to over $1.2 trillion \u2014 threaten unprecedented losses given covenant deterioration. And\u00a0<strong>bond ETFs could face a liquidity crisis as a flood of redemptions force offloading of all-too-illiquid bonds\u00a0<\/strong>(see\u00a0<em>WILTW\u00a0<\/em><a href=\"https:\/\/www.13d.com\/articles\/wiltw-2019-01-31-e06-december-revealed-the-serious-threat-leveraged-loans-pose-to-the-financial-system-why-are-investors-still-not-listening\/\">January 31, 2019<\/a>)<strong>.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2026click on the above link to read the rest of the article\u2026<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.zerohedge.com\/s3\/files\/inline-images\/0_65QhUMi_OnTGR0pg.png?itok=lOxCTqED\"><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Corporate-Debt Reckoning Is Coming Corporate debt is the timebomb everyone saw ticking, but no one was able to defuse.&nbsp;Ratings agencies warned about it: Moody\u2019s, S&amp;P. Central banks and international financial institutions did too: the Fed, the Bank of England, the Bank for International Settlements, the IMF. Financial luminaries expressed concern: Jamie Dimon, Seth Klarman, [&hellip;]<\/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":[29307,8898,662,855,4318],"class_list":["post-52157","post","type-post","status-publish","format-standard","hentry","category-economics","tag-13d-global-strategy-and-research","tag-corporate-debt","tag-quantitative-easing","tag-viral-pandemic","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52157","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=52157"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52157\/revisions"}],"predecessor-version":[{"id":52159,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52157\/revisions\/52159"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=52157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=52157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=52157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}