Posted 3/25/2024, 3:48:15 PM
Junk-Rated Firms Face Mounting Risks As Rates Rise But Profits Lag
- Junk-rated US companies seeing higher interest costs as Fed raises rates, but profits not keeping pace
- Ratio of earnings to interest expenses at lowest level since pandemic, indicating less income to service debt
- Prolonged higher rates mean borrowers will feel pinch even after hikes end
- Leveraged loan default rate climbing closer to peak levels seen in past recessions
- Loans worse off than bonds in terms of coverage ratios and downgrades/defaults due to floating rates
