An alarming economic situation. The indebtedness of the world’s largest companies is increasing and has reached a new record, according to Janus Henderson’s annual report published on Wednesday (July 12th). But the rise in interest rates will make them more reluctant to borrow, put the experts into perspective.
The indebtedness of the panel of 933 companies worldwide (all sectors except financial and real estate) amounted to 7,802 billion dollars as of June 1, 2023, said the asset manager, the highest level since the first edition in 2014. This is an increase of 6.2% at constant exchange rates compared to a year ago.
Companies in the telecommunications sector remain the most indebted, including Verizon (1st, $172 billion), AT
Conversely, the colossal profits of the oil companies have allowed them to reduce their debt to the lowest level in almost a decade. The asset manager expects this stock of debt to decrease in the coming months.
“Rising borrowing costs and slowing economic activity should prompt companies to seek to pay down some of their debt,” said Janus Henderson.
But so far, the hike in rates, prompted by central banks to reduce inflation, has had only a limited impact on large companies, with interest cost increases limited to 5.3% at constant exchange rate: companies in effect borrow on the bond market at fixed rates, which protects them until they need to refinance their debt.