As the huge debt of American companies is about to expire, and the Fed's interest rate hikes have led to an increase in debt reinstatement costs, a wave of bankruptcy in breach of contract is sweeping the United States.
According to data from Moody's Investor Service Company, so far this year, 41 and one corporate bond defaults have occurred in the United States and Canada, respectively, which is the area with the largest breach of contract worldwide, more than twice the same period of 2022.
At the same time, data from the S & P global market intelligence company shows that as of June 22, American companies have submitted 324 bankruptcy applications, close to the total level of 374 in 2022.As of April this year, there were more than 230 bankruptcy applications, which was the highest level since 2010.
Emergency medical service provider ENVISION
Healthcare is the largest default company in May.According to Moody's data, the company's debt was more than $ 7 billion when applying for bankruptcy.
According to S & P global data, home security and alert company Monitronics
Internal, regional financial institutions, Silicon Valley Banks, and home supplies retail chain BED
BATH & Beyond, Diamond Sports (Diamond
Sports is one of the largest protagonists in the largest bankruptcy case so far this year.
1. High interest rate is the culprit
Baseders and analysts said that high interest rates are the culprits of corporate difficulties.Those companies either need more liquidity or have been carrying heavy debt. They need to make re -financing, and they all face the problem of high costs of new debt.
2. Bobbing rate or further rise
Earlier last week, Fed Chairman Powell said that it is expected to make more interest rate hikes this year until it has made more progress in reducing inflation.This means that the default rate of US companies in the next few months may rise further.
Moody's predictable that by the end of this year, the global default rate will rise to 4.6%, which is higher than 4.1%long -term average.It is estimated that by April 2024, this ratio will rise to 5%, and then it will begin to relieve.
Solomon
PARTNERS Capital Transformation and Debt Consultation Co -Director MARK
Hootnick said that there will be more breach of contract.So far, "We have been in an extremely loose credit environment, and frankly, those companies that were not enough to pay debt financing were raising debt unlimited."
Chamus Parihapitia (Chamath
Palihapitiya also recently warned that as hundreds of billions of dollars debt will expire, American companies are hitting the high debt wall, which will lead to the next round of "explosive thunder" bankruptcy.
He said that many companies borrowed a large number of short -term debt at low interest rates during the epidemic, and re -financing now will become their worst problem.
