The Sky is Falling! (or is it?) According to a report from S&P from 2016 over $1 Trillion of corporate debt was set to fall due in 2020, a possible maturity wall.
Why does this matter?
Well, the report also notes that over 32% of this is at a “speculative grade”.
Sure, that’s fine, they can probably just refinance and rollover plus interest rates are super low right now anyway, everything is ok.
Also in a 2019 report JPM noted this was probably a non-issue, citing investors hunger for yield.
True, but what if there was macro level event, say a global pandemic that might make lenders more risk averse, disrupt companies supply lines and close their business’ for an indefinite period? Well that may cause some problems.
Recently both Ford and Colombia have had their debt downgraded in light of this.
In the coming months we may see alternative financing measures such as share issuance’s or going cap in hand to the government, maybe some defaults, neither a desirable option.
We aren’t saying that the sky is falling, but it can’t hurt to look up once in a while.
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