Corporate Debt Cuts Fuel Surge in Leverage-Worry Bonds

Date : 08/19/2019 @ 10:53AM
Source : Dow Jones News
Stock : Anheuser Busch Inbev SA NV (BUD)
Quote : 96.97  0.0 (0.00%) @ 1:11PM

Corporate Debt Cuts Fuel Surge in Leverage-Worry Bonds

Anheuser Busch Inbev SA NV (NYSE:BUD)
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By WSJ City 

Corporate America has had an unusual priority in recent months: debt reduction. That's been much appreciated by Wall Street, where assessing the economic fundamentals of a handful of giant, heavily indebted companies has consumed investors and analysts for months.

KEY FACTS

--- Corporate leverage remains a topic of concern for several triple-B rated borrowers.

--- Those are firms whose credit ratings are the lowest rung of investment-grade.

--- Such firms, though, are raising cash, and looking to reduce debt and risk.

--- AT&T has reduced its net debt by roughly $9bn since the start of the year.

--- AB InBev has cut its dividend and sold its Australian unit as part of a bid to reduce its $100bn debt load.

Why This Matters

Newfound restraint among these firms has prompted surprising market moves. BBB-rated corporate debt has outpaced other grades. That's despite fears that a wave of mergers and buybacks had made debt vulnerable to downgrades.

Both safer than speculative-grade debt and higher-yielding than other investment-grade bonds, triple-Bs have been a sweet spot for investors facing slowing economic growth and a sharp decline in US Treasury yields. But some investors worry ballooning BBB debt could spell trouble in a downturn. If that credit is downgraded to speculative-grade status, firms' borrowing costs could rise, causing further economic disruption.

A fuller story is available on WSJ.com

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(END) Dow Jones Newswires

August 19, 2019 05:38 ET (09:38 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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