Agora Financial on Corporate Debt and Impact of Rising Interest Rates
Newsmax, an American news and opinion website, quoted Agora Financial in an article about corporate debt and the impact of rising interest rates should an economic downturn occur:
“Since 2010, U.S. companies have been growing their debt twice as fast as their profits have been growing. Which might have been OK when interest rates were next to nothing… but now interest rates are, if not exactly ‘normal,’ at least closer to normal than they were three or four years ago.”
Likened to mortgage debt that forced the market into a tailspin back in 2008, corporate debt is following a similar script in terms of collateralized loan obligations (CLOs). As noted by the Fed’s twice-annual Financial Stability Report, leveraged loans are the primary source of “risky business debt” and now “corporations are holding six times their earnings in increasing amounts of debt.”
Additionally, Agora Financial was quoted on Citigroup’s hand in the growing rounds of CLOs and how 2008 compares with today’s situation.
Find the full article here.
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