The Washington Post, March 10, 2020, Fears Of Corporate Debt Bomb Grow As Coronavirus Outbreak Worsens
The coronavirus panic could threaten a $10 trillion mountain of corporate debt, unleashing a cycle of layoffs and business spending cuts that would hit the economy just as some analysts are warning of a recession.
Financial markets already are showing signs of major stress. Even before the full effects of the coronavirus hit the United States, analysts were cutting their earnings forecasts. As of Feb. 28, more than twice as many companies in the Standard & Poor’s 500-stock index had issued negative guidance on their first-quarter earnings as had issued upbeat assessments, according to FactSet, a financial data company.
The danger now is that the economy’s sudden stop — with conferences and other public events canceled, travel discouraged and consumers staying home — will cut revenue for many companies and make it harder for them to repay their creditors.
Fearing the higher interest charges — and hoping for additional Fed rate cuts — some corporate borrowers have delayed issuing debt. “These debt levels truly are troublesome, any way you measure them within the U.S., China and Europe.
