Oct 14, 2018

The one way that corporate income is falling

Data: S&P Global Ratings; Chart: Andrew Witherspoon/Axios

U.S. corporate debt continues to hit new all-time highs. The chart above shows how little operating income (technically, non-financial companies' funds from operations) supports the median American company's ever-growing debt load.

Think of this in personal finance terms. Financial advisers like to say that you shouldn't have total debts, including your mortgage, of more than 2.5 times your income. In corporate America, that ratio is now more than 6.5 times.

  • Up until now, interest rates have been low and credit has been flowing freely, making it easy for companies to service these debts. But now rates are rising, and these debt loads could start to bite.
"Given where we are in the credit cycle, there are concerns about how and when prevailing conditions will turn. Such a change could spark bouts of strong volatility and periods of rapidly rising financing costs and illiquidity — limiting borrowers' financial flexibility — giving rise to increased defaults."
Jacob Crooks and David Tesher, S&P Global Ratings

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The saga of Iraq's debts

Data: Simon Hinrichsen / LSE; Chart: Axios Visuals

When the U.S. invaded Iraq in 2003, it was taking control of the most indebted nation in the world.

Why it matters: Iraq's debt at the time was an astonishing $130 billion, and the eradication of that debt was a rare example of international unity and cooperation in the interests of a debtor country.

Go deeperArrowJan 2, 2020

World Bank cuts growth forecast for fourth time in a row

Photo: Win McNamee/Getty Images

The World Bank cut its global growth forecast for the fourth straight time on Wednesday, reducing expectations by 0.2 percentage points each year for 2019, 2020 and 2021.

"Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist. ... U.S. growth is forecast to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty."
— World Bank statement on its Global Economic Prospects report
Go deeperArrowJan 9, 2020

Security contractor Constellis in talks for $1 billion debt restructuring

Last week's storming of the U.S. embassy in Baghdad. Photo by Murtadha Sudani/Anadolu Agency via Getty Images.

Constellis, a Reston, Va.-based security contractor owned by Apollo Global Management, is in talks with creditors to restructure its $1 billion of debt or enter a pre-negotiated bankruptcy, per Bloomberg.

Why it matters: Constellis is partially responsible for security at the U.S. embassy in Baghdad, which came under assault last week — possibly precipitating the U.S. decision to kill Iranian Gen. Qassem Soleimani.

Go deeperArrowJan 6, 2020