Stressed out
Three industries in particular will struggle to pay their debts over the next year. Many of those firms will either collapse or have to raise capital. Here’s where the stress is.
Rate rises came thick and fast. Central bankers across the world jacked rates up at a breakneck pace to fight inflation. Despite that, the global financial system has held up quite well, much to the confusion of many economists. Rate hikes have helped some sectors but hammered others. To figure out which industries are the most stressed out, 𝑉𝑎𝑙𝑢𝑎𝑏𝑙 looked at the ratio of their total profits and cash to the interest and debt payments they must make over the next 12 months. The lower that ratio, the more stressed out the industry. A ratio of less than one means they won’t survive the year without fresh capital. Three of the 145 sectors in this sample stand out as particularly distressed.
The most distressed companies are independent power and energy traders. That industry only has enough cash and profits to make eight months of debt payments. Further, almost a quarter of firms in the sector are zombie firms that don’t earn enough to cover their interest payments. Volatile energy …