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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.

Updated 58 mins ago - Politics & Policy

Facebook paying up to $14M to settle employment discrimination claims

Photo: T.J. Kirkpatrick/Bloomberg via Getty Images

Facebook has agreed to pay up to $14.25 million to settle allegations that it discriminated against American workers by reserving positions for temporary visa holders, the Justice Department announced on Tuesday.

Why it matters: The settlement represents the largest civil penalty and monetary award that the Civil Rights Division has recovered in the 35-year history of the Immigration and Nationality Act's anti-discrimination provision.

Updated 3 hours ago - World

Mapping repression in China's Xinjiang region

Data: © Mapbox, © OpenStreetMap; Map: Will Chase/Axios

A sweeping new report released today by an Australian research organization reveals new details about how the Chinese Communist Party — and specifically who within the party — is carrying out its campaign of repression in Xinjiang.

Why it matters: Uncovering the actual offices and individuals implementing the Chinese government's genocide and forced labor policies in Xinjiang can bring accountability and help international companies delink supply chains in compliance with U.S. and EU forced labor laws.