But companies with lower credit scores, which make up a significant portion of all large businesses and include well-known names like Ford and Macy’s, might find government markets more expensive. Yum Brands, which has a relatively low, or “junk” credit rating, pegged its interest rate at 7.75% on corporate bonds it sold on Monday, nearly double what she paid a month ago.
Yum, who owns KFC and Taco Bell, has extended his offer to $ 600 million from the $ 500 million initially forecast based on strong investor demand, but he could be among the lucky ones. The lowest rated companies play an important role in the economy. Half of the 1,148 companies on the Russell 3000 Stock Index that have ratings are below the investment grade, according to calculations based on data from CapitalIQ. Last year, these companies employed more than six million people and had sales of $ 2.7 trillion.
To strengthen their cash flow, hundreds of companies have chosen to tap into the lines of credit that banks agreed to make available years ago. Ford, which is still paying off a federal government loan made over a decade ago, last week patted a $ 15 billion line of credit; General Motors has noted it would take $ 16 billion. The two have halted auto production in North America, but are reorienting factories and workers to manufacture emergency batches of ventilators in undersupplied hospitals. Macy’s, who said he would put most of the employees on leave, lowered a $ 1.5 billion line of credit in March.
Even as Hernandez and other longtime Wall Street executives predict a sea change in the way companies manage finance, their banks – which have reduced their own reliance on borrowed money and increased their access to funds. liquidity as a result of new regulations enacted after the financial crisis – continue to lend.
Between March 11 and March 18, bank loans jumped $ 243 billion to a total of $ 4.1 trillion, according to Mr. Foran, the analyst, who added that the increase occurred. while companies used the credit they were already entitled to receive from banks under previous agreements. Consumer discretionary businesses – coffeehouse chains, shoemakers, automakers, and other non-essential service providers – made up by far the largest proportion of businesses borrowing money from banks, Autonomous noted in a recent report, as a consequence. direct from the sudden drop in their income. virus containment efforts. Industrial firms and real estate companies, the company said, were the second and third largest users.
In the week ending March 18, the most recent week for which data is available, JPMorgan was the most active financing provider, playing a leading role in credit facilities estimated at $ 78 billion. dollars that were used, according to numbers tracked by Standard. & Poor and Autonomous. Bank of America loaned from an estimated $ 31 billion pool of credit. The companies seem to put the money they withdraw back into the banks.