From the Economist:
...in aggregate the West’s corporate debt load looks manageable ... American public companies’ earnings before interest and tax are a healthy 6.7 times the interest due on their debts, up from 3.6 times in 2000.
But 3 types of loans may be in for a "reckoning:"
- The first comprises businesses that have come to rely on less orthodox sources of credit, which are often those with the diciest prospects.
- The second area of vulnerability involves so-called zombie firms: uncompetitive enterprises, kept alive by cheap debt and, during the pandemic, government bail-outs.
- The third and biggest area of concern involves firms that are merely unfit rather than undead.