HomeFinance NewsEconomyDebt Deluge: Corporate Defaults Surge, Brace for More Financial Tremors

Debt Deluge: Corporate Defaults Surge, Brace for More Financial Tremors


Corporate debt defaults soared 80% in 2023 and could be high again this year, S&P says


In 2023, 153 companies defaulted on their debt payments, which is significantly higher than the 85 that defaulted in 2022.

This shows a trend of increasing corporate debt defaults.

The defaults were largely due to low-rated companies with negative cash flow, high debt burdens, and poor liquidity.

Consumer-facing companies, particularly those in media and entertainment, were the most affected.

Experts predict that this trend may continue in 2024, as companies grapple with the weight of high-interest rates and an overall weaker economic outlook.

The burden of corporate debt in the U.S. alone is estimated to be $13.7 trillion.

There’s concern about a potential “corporate debt cliff” in the coming years, as a significant portion of maturing debt that was initially financed at low rates will come due.

This could lead to more defaults, especially if the economy continues to slow down.

The Federal Reserve’s expected rate cuts may provide some relief, but they are not likely to be enough to prevent further defaults completely.

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    “Corporate debt defaults soared last year and could be a problem again in 2024 as cash-strapped companies deal with the burden of high interest rates,”

    “The burden, both in the U.S. and globally, could be exacerbated by “slower economic growth and higher financing costs” that could contribute to defaults”

    “In 2024, we expect further credit deterioration globally, predominantly at the lower end of the rating scale” the firm said.”

    “Much of the total came from low-rated companies that had negative cash flows, high debt burdens and weak liquidity, S&P said.”

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