Corporate Debt To EBITDA Hits All Time High
By Tyler Durden
In its latest Global Stability Financial Report, the IMF issued a stark warning, bringing attention to the troubling and seemingly unstoppable growth in global corporate debt and the threat that could be unleashed by a sharp move higher in rates, one which the IMF estimates could result in as many as 22% of total corporations – amounting to almost $4 trillion in assets – being unable to cover their interest payments, leading to an avalanche of defaults. Furthermore, as the IMF highlighted, leverage had reached, and surpassed, historical levels which in the past translated into economic recessions.
The report prompted some to challenge the IMF report’s assumptions, and to point out that leverage was in fact far more modest than during previous cycles.
To resolve this particular debate, Morgan Stanley has conveniently issued a report which looks at corporate debt from several different angles, and which reaches a uniform conclusion: debt, whether total or net, relative to either EBITDA, Cash From Operations or Free Cash Flow, is at or near all time highs highest it’s been.
Here are the summary findings:
Most ways we slice the data, corporate leverage is elevated, in many cases at or near prior cycle peaks – IGZeroHedge