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Illustration: Aïda Amer/Axios

U.S. companies have taken on a historic amount of debt this year, with investment grade corporates already issuing a record $1.5 trillion in bonds, more than any full-year total ever. But many have also upped their holdings of cash, making net debt burdens far lower than expected, data from Bank of America Securities shows.

Why it matters: Lower indebtedness means companies will have stronger balance sheets and better ratings. That could mean not only do fewer companies default on debt than expected, but it "ultimately should lead to an upgrade cycle" in credit ratings, BofA analysts say.

By the numbers: While investment grade industrial companies increased indebtedness by $397 billion in the first half of the year, they also grew cash holdings by $351 billion, meaning net debt rose by only $46 billion.

  • BofA credit strategist Hans Mikkelsen points out in a note that gross debt for IG non-financial non-utility issuers grew by 8.7% year over year, but was allocated heavily in cash and securities holdings.
  • Net debt actually declined by 4.8% (adjusting for the effect of ASC 842 accounting rule change).

The intrigue: "This is a dramatically better outcome for corporate balance sheets overall than what it looked like at the darkest hour," Mikkelsen said.

  • "Recall that economists and equity analysts lowered estimates so much that we have seen large beats both for economic data and corporate earnings for [the second quarter]."

Go deeper

Dan Primack, author of Pro Rata
Dec 9, 2020 - Technology

Airbnb valued at $47 billion in IPO

Illustration: Sarah Grillo/Axios

Airbnb on Wednesday raised $3.5 billion in its IPO at a fully diluted valuation of around $47.3 billion, and will begin trading Thursday on the Nasdaq under ticker symbol ABNB.

Why it matters: This is the culmination of a remarkable rebound for the hospitality giant, which many counted out once the pandemic began its rampage.

54 mins ago - World

Putin foe Navalny to be detained for 30 days after returning to Moscow

Russian opposition leader Alexey Navalny. Photo: Oleg Nikishin/Epsilon/Getty Images

Russian opposition leader Alexey Navalny has been ordered to remain in pre-trial detention for 30 days, following his arrest upon returning to Russia on Sunday for the first time since a failed assassination attempt last year.

Why it matters: The detention of Navalny, an anti-corruption activist and the most prominent domestic critic of Russian President Vladimir Putin, has already set off a chorus of condemnations from leaders in Europe and the U.S.

Biden picks Warren allies to lead SEC, CFPB

Photo: Justin Sullivan/Getty Images

President-elect Joe Biden has selected FTC commissioner Rohit Chopra to be the next director of the Consumer Financial Protection Bureau (CFPB) and Obama-era Wall Street regulator Gary Gensler to lead the Securities and Exchange Commission (SEC).

Why it matters: Both picks are progressive allies of Sen. Elizabeth Warren (D-Mass.) and viewed as likely to take aggressive steps to regulate big business.