According to a report by Janus Henderson, major listed companies saw their interest payments jump by 24.5% between June 2023 and June 2024.
Large listed companies worldwide spent 24.5% more on interest payments on their loans in 2023/2024, a trend that is expected to continue in the coming years, according to a report from Janus Henderson published on Wednesday.
With $458 billion paid to their creditors between July 2023 and June 2024, the impact of the rise in interest rates over the past two years “has now started to be felt”, particularly in the United States, explains the asset manager in its annual report on corporate debt.
“Debt servicing costs are reaching record levels in all countries in our index” and in almost all sectors, underlines the report, which is based on 933 non-financial companies with the largest market capitalization.
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Debt burden will continue to increase
Companies adapted and, while they continued to borrow, with net debt rising by $378 billion, they did so at a slower pace than the previous year. Janus Henderson “expects debt burdens to continue rising even as central banks begin to cut rates.”
“This reflects the refinancing of maturing bonds and low-yield loans with more expensive borrowing. Even if these new loans do not reach the peak in rates, they will still be more expensive than the cheap borrowing they replace,” the manager explains.
However, “there is no evidence that the world’s largest companies are over-indebted overall” and rising profits are helping them cope, according to the report. The most indebted companies include, as is the case every year, car manufacturers (Volkswagen 1st, Toyota 2nd, Ford 6th, Mercedes-Benz 9th, GM 10th) and telecom operators (Verizon 3rd, AT&T 4th, Deutsche Telekom 5th).
For carmakers, “sales have increased and profits have grown by more than a quarter year-on-year. This has significantly increased their working capital requirements, particularly in relation to customer financing,” says Janus Henderson.
