companies debt company announced ratio data investors

techsuch May 9, 2021 0 Comments

These U.S. Companies Have The Highest Debt-To-Equity Ratios Right NowU.S. Global InvestorsU.S. companies have never had so much debt on their books as they do now. Asof the fourth quarter of 2019, non-financial firms owed some $9.6 trillion inoutstanding debt, a figure that’s up more than 57 percent from the financialcrisis 10 years earlier, according to data provided by the Securities Industryand Financial Markets Association (SIFMA).Thanks to a decade-long credit binge driven by rock-bottom borrowing costs,corporate debt as a percent of U.S. GDP now hovers around 47 percent, ornearly half the size of the economy. As you can see below, this level wellexceeds those we saw in the last two credit cycles.U.S. Global InvestorsEven in good times, this would be cause for concern. Indeed, I warned aboutballooning corporate debt and the economic risks it poses a year ago, backwhen no one had yet heard of SARS-CoV-2 or COVID-19.And it’s not just the amount of debt that matters, but the quality. In theyears since the financial crisis, BBB-rated bonds––those that sit at the verybottom of investment-grade corporate debt––have exploded 200 percent,according to S&P Global. The pool of BBB-rated bonds grew to more than $3trillion for the first time last year and now represents 53 percent of theentire investment-grade market.U.S. Global InvestorsThat percentage will only increase, though, as the two biggest ratingsagencies, S&P and Moody’s Investors Service, are currently downgrading U.S.companies at the fastest pace since the financial crisis, with downgradesoutpacing upgrades three to one.The worry now is that, as more and more companies’ creditworthiness isdowngraded to “junk” status, it will prompt a flood of selling, with notenough buyers to absorb it all.Having said that, I was curious to see which S&P 500 companies had the mostdebt on their books relative to equity before markets began to tumble due tothe spread of the coronavirus. As of December 31, the S&P as a whole had adebt-to-equity ratio of 1.58 percent, meaning that for every $1 they had incash and other assets, they had $1.58 in liabilities.So which companies had the highest debt-to-equity? Below are those that had aratio of over 10.00, starting with a ratings agency, interestingly enough.### Moody’s Corp – 10.06Moody’s Corp. had a debt-to-equity ratio of higher than 10.00 at the end of2019, thanks in large part to a number of recent acquisitions. In July, theNew York City-based company bought a majority stake in Four Twenty Seven, a“leading provider of data, intelligence and analysis related to physicalclimate risks,” according to the press release, and in February, Moody’scompleted its acquisition of Regulatory DataCorp (RDC), a “leading provider ofanti-money laundering (AML) and know-your-customer (KYC) data and duediligence services.” This complements a 2017 acquisition of company dataprovider Bureau van Dijk (BvD).### Lamb Weston Holdings, Inc. – 12.00Lamb Weston may not be a household name, but the food it produces is eaten andenjoyed all over the world, from french fries to potato chips to hash browns.The Idaho-based company, which spun off from Conagra Brands in 2016, had long-term debt valued at $2.5 billion as of May 2019. Meanwhile, it held cash inthe amount of $55.6 million.### Lowe’s Companies, Inc – 12.04Lowe’s, the second largest hardware store in the U.S. following The HomeDepot, had a debt-to-equity ratio of 12.04 at the end of 2019. In May, theretail giant announced that it had completed the purchase of the RetailAnalytics platform from Boomerang Commerce, which is intended to help with“strategic and data-driven pricing and merchandise assortment decisions.” OnMarch 24, Lowe’s announced that it was issuing a total of $4 billion in newnotes, taking advantage of low borrowing costs.### Alliance Data Systems Corp. – 14.23Like Lamb Weston, Alliance Data Systems may not be a household name, butchances are fair to good that you use their services on a regular basis. Themarketing services provider, based in Plano, Texas, manages more than 160branded credit card programs for companies ranging from Wayfair to J. Crew.It’s estimated that 40 million people have at least one of Alliance’s managedcards in their wallets. It was highly leveraged at the end of 2019, with adebt-to-equity ratio of 14.23.### O’Reilly Automotive, Inc. – 14.75An estimated 93 percent of American households own at least one vehicle, andas we all know, things break on occasion or just need to be replaced. O’ReillyAuto Parts is the largest such retailer in the U.S., with a market cap ofaround $34 billion in November, before stocks began to sell off. TheSpringfield, Missouri-based company announced in August that it was acquiringMexican auto parts retailer Mayoreo de Autopartes y Aceites in a stockpurchase agreement.### Marriott International, Inc. – 17.00Hotels have been among the hardest hit industries due to stay-at-home andsocial distancing orders, and Marriott, the world’s largest hotel operator, isno exception. The company, which operates in as many as 130 countries, has hadto furlough tens of thousands of workers as hotel rooms sit empty. As of June,Marriott had net debt of $10.3 billion, about half of that coming due thisyear. In October, the company announced it would be acquiring Barbados-basedElegant Hotels Group in a $130 million all-cash deal.### Colgate-Palmolive Co. – 72.50The most highly leveraged S&P 500 company in 2019––by far––was none other thanColgate-Palmolive, maker of such household brands as Irish Spring, Ajax,Cuddly, Speed Stick and, of course, Colgate toothpaste and Palmolive dishdetergent. For every $1 the New York-based company has, it owes $72.50 indebt. Last year it made its first $1 billion acquisition since 1995, buyingEuropean skin care company Laboratoires Filorga Cosmetiques for $1.7 billion.This was followed in January 2020 by the announcement that it had agreed toacquire Hello Products, “one of the fastest-growing, premium oral care brandsin the United States.” Also, at a time when many companies are cutting orsuspending dividends, Colgate announced last month that it would be raisingits dividend, from $0.43 to $0.44 a share, effective in the second quarter.For full disclosures pertaining to this post click here.

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