Takeaways from AP analysis on the rise of world's debt-laden 'zombie' companies
They are called zombies, companies so laden with debt that they are just stumbling by on the brink of survival, struggling to pay even the interest on their loans and often just a bad business hit away from dying off for good
NEW YORK — An Associated Press analysis found the number of publicly-traded “zombie” companies — those so laden with debt they're struggling to pay even the interest on their loans — has soared to nearly 7,000 around the world, including 2,000 in the United States.
And many of them soon could be facing their day of reckoning, with due dates looming on hundreds of billions of dollars of loans they may not be able to pay back.
“They’re going to get crushed,” Valens Securities Managing Director Robert Spivey said of the weakest zombies.
Here are the key takeaways from the AP’s analysis:
Zombies are commonly defined as companies that have failed to make enough money from operations in the past three years to pay even the interest on their loans. Their numbers have swelled because low interest rates for years allowed companies to pile up plenty of cheap debt, only to be whiplashed by stubborn inflation that has pushed borrowing costs to decade highs.
AP’s analysis found their ranks in raw numbers have jumped over the past decade by a third or more in Australia, Canada, Japan, South Korea, the United Kingdom and the U.S., including companies that run Carnival Cruise Line, JetBlue Airways, Wayfair, Peloton, Italy’s Telecom Italia and British soccer giant Manchester United.
Many zombies lack deep cash reserves, and the interest they pay on many of their loans is variable, not fixed, so higher rates are hurting them right now.
As the number of zombies has grown, so too has the potential damage if they are
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