A $500 billion corporate-debt wave likely to hit the global economy soon
Richard Cooper’s phone is a something of an early alarm bell for the global economy. Lately, it’s been ringing a lot.
A partner at Cleary Gottlieb, a top law firm for corporate bankruptcies, he’s advised businesses worldwide for decades on what to do when they’re drowning in debt. He did it through the global financial crisis, the oil bust in 2016 and Covid-19.
And he’s doing it again now, in a year when big corporate bankruptcies are piling up at the second-fastest pace since 2008, eclipsed only by the early days of the pandemic. “It feels different than prior cycles," Cooper said. “You’re going to see a lot of defaults." His perch has given him a preview of the more than $500 billion storm of corporate-debt distress that’s already starting to make landfall across the globe, according to data compiled by Bloomberg.
The tally is all but certain to grow. And that’s deepening worries on Wall Street by threatening to slow economic growth and strain credit markets just emerging from the deepest losses in decades. On the surface, much of it looks like the usual churn of capitalism, of companies undermined by forces like technological change or the rise of remote work that has emptied office buildings in Hong Kong, London and San Francisco. Yet underneath there’s often a deeper, and more troubling, through-line: Debt loads that swelled during an era of unusually cheap money.
Now, that’s becoming a heavier burden as central banks ratchet up interest rates and appear set to hold them there for longer than nearly everyone on Wall Street expected. The rising tide of distress is, of course, to a certain degree by design. Caught by surprise as inflation surged, monetary policymakers have been aggressively draining cash from the
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