Cheap Money Era Nears End

U.S. companies are facing the end of the era of cheap financing as interest rates rise, driving up borrowing costs and putting pressure on profits and investment—particularly at heavily indebted firms. Companies will need to refinance around $2 trillion over the next two years. The average interest rate on debt issued by the highest-rated companies is 3.6%, compared with yields of nearly 18% on lower-rated bonds. Although AI investments, estimated at more than $1 trillion a year, are supporting economic activity and tempering expectations of near-term bankruptcies, the report says executives will have to give greater priority to liquidity, efficiency and financing costs.

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