The corporate debt problem refers to the significant increase in debt levels among companies, which can pose risks to individual businesses and the broader economy.
Global corporate debt has reached record levels in 2024. Corporate bond and leveraged loan issuance grew to around $7.93 trillion, an increase of over 33% from the previous year. While not all corporate debt is problematic, the current levels and growth trends indicate a severe situation that requires careful monitoring and potential policy interventions to mitigate risks to global economic stability.
The main drivers behind the increase in corporate debt in the U.S. and Europe include:
Takeovers and acquisitions: Over half of the increase in borrowing, particularly in the pharmaceutical sector, was driven by takeover activity.
Shareholder distributions: Some companies have been raising debt to make distributions to shareholders.
Business growth: Stronger economic growth has led to increased working capital needs, especially i…