Corporate Debt

It’s amazing the amount of debt some companies have outstanding. For example, I went to a $700 million bond closing this morning for one of the large U.S.-based global investment banks. You would think that $700 million would be too much debt for anyone to service. But it’s not. This Company has been doing this same transaction for roughly the same amount of money each month for a number of years. That’s the only way that it can survive; the company issues more debt to pay off outstanding debt and to have cash to invest how it chooses and to upgrade infrastructure and equipment. While companies manage to stay afloat despite massive debt obligations, the notion of borrowing money to pay off existing debt is a vicious cycle (and not one recommended for individuals). Yet, it is what our economy is based on. Without corporate debt, a lot of people, including myself, would be out of our current jobs. And if that ever happens, I may have no choice but to leverage myself with some debt and thereby join those struggling in this vicious cycle.

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