Even McKinsey is now getting in on the forecasting act! ...Aivars Lode
May 2019 Article from McKinsey & Company:
It’s true that in developed-market companies, leverage ratios (expressed as debt to EBITDA) have gone up, as have the share and absolute number of companies earning sub-investment grades from credit-rating agencies like Moody’s Investors Service and S&P Global. The analysts and policy experts chalk up these figures to companies’ pursuit of share buybacks and other forms of financial engineering.
But a look behind the numbers tells a different story. In fact, our analyses indicate that downgrades of companies’ credit ratings have not been significantly widespread, that much of the increase in sub-investment-grade companies is because of changes in newly rated corporate debt, and that most companies can cover payments on outstanding corporate debt as easily as they did ten years ago.
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May 2019 Article from McKinsey & Company:
Is a leverage reckoning coming? Not yet. Despite rising corporate-debt levels, research shows companies can cover their obligations for now. But they should prepare for a possible downturn by stress-testing their capital structure.
Economic analysts and policy experts have been sounding the warning bell about rising corporate-debt levels for the past few years. For instance, the former chair of the US Federal Reserve Board, Janet Yellen, has warned that companies (non-financial ones, in particular) are taking on too much debt and could have trouble meeting their obligations in the case of another financial crisis.It’s true that in developed-market companies, leverage ratios (expressed as debt to EBITDA) have gone up, as have the share and absolute number of companies earning sub-investment grades from credit-rating agencies like Moody’s Investors Service and S&P Global. The analysts and policy experts chalk up these figures to companies’ pursuit of share buybacks and other forms of financial engineering.
But a look behind the numbers tells a different story. In fact, our analyses indicate that downgrades of companies’ credit ratings have not been significantly widespread, that much of the increase in sub-investment-grade companies is because of changes in newly rated corporate debt, and that most companies can cover payments on outstanding corporate debt as easily as they did ten years ago.
Read full article here
