Junk-rated companies in the U.S. have “meaningful exposure” to interest rate hikes by the Federal Reserve, raising concerns over defaults as a potential recession looms, according to Jim Reid, head of thematic research at Deutsche Bank.
In an emailed note Tuesday, Reid looked at companies’ exposure to floating-rate debt. “While the overall US and EU corporate exposure is low, junk-rated US & European corporates have substantially higher exposure,” he wrote. Companies with a heavy debt load risk having a tougher time meeting their debt obligations in an economic downturn.
That is a tautology.
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