The Janus Henderson Corporate Debt Index – a long-term study into trends in company indebtedness around the world – shows that companies took on record new debts totaling $1.3 trillion in 2020 as global profits plunged by a third and companies raised cash to ensure they could weather the global recession.
- Total corporate debt soared 10% to a record $13.5 trillion in 2020. However, between January and June 2021, companies have borrowed almost no further cash as developed nations look beyond the pandemic.
- Furthermore, companies have not spent any of this new borrowing as they have preserved cash through the pandemic, so net debt (total debt minus cash) has not increased.
- Businesses are starting to deploy their collective $5.2 trillion cash pile; we expect to see growth in capital expenditure, dividend payments and share buybacks through H2 2021 and beyond.
- Improving credit fundamentals and ultra-loose monetary policy offer opportunities for bond investors, particularly identifying redeemed “fallen angels” and “rising stars” in the high yield category.