RUSSELL 2000 DEBT GROWTH & CREDIT QUALITY A GROWING CONCERN
MATASII RESEARCH ANALYSIS & SYNTHESIS:
Non-bank corporations' new debt has outpaced the free cash that these companies have been generating - especially companies that make up the Russell 2000 index.
This could suggest further vulnerabilities going forward.
Perhaps the most frightening detail is that companies rated BBB+, BBB, or BBB- (the three lowest grades before they would hit “junk” status and be faced with higher interest payments) now outnumber companies with some level of debt rated A.
Companies appear to be purposely toeing the line between BBB- and junk, trying to take on as much debt as possible before getting downgraded.
From the below chart, you can see how it looks like companies are "pushing it":
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MATA: DRIVERS - CREDIT
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