( London, 13rd July 2020 ) A new study by Janus Henderson, a global asset management group, of 900 companies estimates that in response to the new crown epidemic, companies around the world will add up to US$1 trillion (RM4.3 trillion) in new debt in 2020.
According to the report, this unprecedented growth will push the total global corporate debt to jump 12% to about 9.3 trillion US dollars. Coupled with years of debt accumulation, the debt of the world's most indebted companies is equivalent to the debt level of many middle-sized countries.
The company’s portfolio manager, Meyer, said, “The epidemic has changed everything, and now it’s time to save capital and strengthen the balance sheet.”
Companies raised $384 billion from the bond market between January and May. Meyer estimates that the issuance of "high-yield" corporate bonds with higher risks and lower ratings will set a new record in recent weeks.
In March, the credit market was closed to companies other than the most trusted companies, but the emergency corporate bond purchase plans of central banks such as the Federal Reserve, the European Central Bank and the Bank of Japan prompted the credit market to open its doors again.
The total debt of the companies included in this new bond index has increased by 40% compared to 2014, and the debt growth rate far exceeds the profit growth.
US corporate bonds of US$3.9 trillion
The total pre-tax profit of these 900 companies increased by 9.1% to $2.3 trillion. In 2019, the ratio of measuring debt to equity reached a record 59%, and the ratio of interest payments to profits rose to a new high.
The corporate debt of US companies is 3.9 trillion U.S. dollars, almost half of the global scale, and the growth rate in the past five years has exceeded that of any major economy outside of Switzerland. There was a wave of major mergers and acquisitions in Switzerland.
The size of German corporate bonds is US$762 billion, ranking the second highest. Among the most highly indebted companies in the world, Germany has also arranged three companies. Among them, Volkswagen has a debt of 192 billion U.S. dollars, which is on par with countries such as South Africa or Hungary. However, the company's debt is expanded by the auto financing sector.
**Info & Image are taken online
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