Higher interest rates could cost US companies $380B in 'slowly unfolding crisis'

foxbusiness.com:

Main Street Asset Management CIO Erin Gibbs and QI Research CEO Danielle DiMartino Booth discuss whether the Fed will hike interest rates this year on 'Making Money.'

Companies across the U.S. are barreling toward a refinancing cliff that could cost them billions in the new era of high interest rates, setting up a «slowly unfolding crisis.»

New research published by Baringa, a global consultancy firm, found that companies that refinance between this year and 2030 will pay an additional $381 billion in interest costs due to elevated borrowing rates. This amounts to the largest single increase in debt-related costs and the highest cumulative interest payment total ever faced by U.S. companies.

The largest expense is expected to occur in 2024, with more than $3 trillion in loans and bonds set to mature this year. Companies refinancing that debt will likely pay $76 billion more in interest this year than they did under lower interest rates, according to Baringa, which analyzed FactSet data.

«It’s tempting to look at plateauing interest rates and conclude that the worst is behind us, but that’s simply not true,» said Cindra Maharaj, partner in Baringa's financial services practice. «In fact, U.S. businesses and the wider economy are just beginning to experience the painful effects of a serious hangover from the rapid escalation in interest rates that will last for several years to come.»

FED'S KASHKARI WANTS TO SEE 'MANY MORE MONTHS' OF GOOD INFLATION DATA BEFORE CUTTING RATES

A «Wall Street» sign in New York, on Jan. 27, 2023. (Photographer: John Taggart/Bloomberg via Getty Images / Getty Images)

The Federal Reserve raised interest rates sharply in 2022 and 2023 to the highest level since 2001 in a bid to slow the economy