Debt Threat From The Depths

Bankruptcy Partner Noel Boeke was quoted in a Tampa Bay Business Journal article about the public companies in the area that loaded up on the most debt over the past couple years, and what they’re doing now to maintain liquidity. At the end of 2019, business was booming — and so was corporate debt. Non-financial corporate debt had reached $6.6 trillion, up 78 percent from the end of the Great Recession. In the last two years alone, corporate debt was up 18 percent nationwide. But with the economy rolling along and interest rates low, few financial analysts took exception to ballooning corporate debt. Then COVID-19 swept across the country, shutting down businesses as stay-at-home orders were enacted by states and cities. The robust economy was upended, and suddenly many companies that had taken on massive amounts of corporate debt saw their revenues reduced to a trickle — or at least a small stream.

“Interest rates have been low, so it’s been attractive to borrow for a while,” said Mr. Boeke. “When you have a lot of debt when the music stops, it suddenly puts many companies in default, with an inability to service that amount of debt.”

READ: Debt Threat From The Depths (Subscription Required)