The bill is coming due on trillions of dollars in companies’ bonds. As much much as $1.7 trillion of non-financial corporate bonds matures globally this year, and $2 trillion or more could mature in each of the next four years, according to research out this week from McKinsey & Co.
Record amounts of debt are maturing just as interest rates are rising, forcing companies to pay up if they want to refinance their maturing bonds. Credit quality has also been declining as top-rated companies have taken on more debt. Roughly 40 percent of nonfinancial corporate bonds now have triple-B credit ratings, the lowest that’s considered investment grade. That’s up from 22 percent in 1990,
Stock investors are starting to take notice. Shares in companies with strong balance sheets have outperformed those with weak balance sheets by 6.3 percentage points this year. For much of the economic cycle, weak balance sheet companies were the outperformers, as companies were rewarded for adding leverage.
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