The International Monetary Fund and the Financial Stability Board have plenty of warnings about U.S. corporations' record indebtedness and the deterioration of credit quality in loans and bonds.
to G20 Finance Ministers and Central Bank Governors, that the FSB is conducting an analysis of the leveraged loans and collateralized loan obligations markets. He lighted areas of potential concern as being high levels of corporate debt, weaker lending standards and creditor protections as well as increased complexity and opacity “which makes it difficult to assess potential spillovers and risks from interconnectedness; and concentration of risks in a few big financial institutions.
and Fitch Ratings have reported, companies increasingly use earnings projections that incorporate add-backs based on their own expectations of cost savings and synergies in M&A deals. They do this to increase the amount that they can borrow. These add-backs in M&A and LBO buyouts significantly understate companies’ leverage.Both in the U.S. and Europe, low interest rates and banks’ desire to increase their net interest margins has enabled companies to become very indebted.
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