The July 29, 2013 post (“Impact Of Low Interest Rates On Corporate Profitability“) discusses estimates of the impact that the low interest rate environment has had on corporate profitability.
A September 18, 2013 Bloomberg article, titled “Bernanke Saves Companies $700 Billion as Verizon Leads Sales,” also discusses the impact that the low interest-rate environment has had on companies.
Notable excerpts include:
America’s companies, from Apple Inc. (AAPL) to Verizon Communications Inc., are saving about $700 billion in interest payments with the Federal Reserve’s unprecedented stimulus.
Corporate bond yields over the past four years have fallen to an average of 4.6 percent from 6.14 percent in the five years before Lehman Brothers Holdings Inc.’s demise, a savings equal to $15.4 million annually per every $1 billion borrowed. Businesses took advantage of the Fed’s largesse to lock in record low rates, extend maturities and raise cash by selling $5.16 trillion of bonds, data compiled by Bloomberg show.
Savings of about $700 billion represents the difference between what companies that have sold bonds since Sept. 17, 2009, are paying based on an average maturity of nine years for securities in the Bank of America Merrill Lynch U.S. Corporate & High Yield Index, versus what they might have paid before the crisis.
As credit loosened, corporate yields plunged as low as 3.35 percent on May 2, from 9.76 percent at the end of 2008. Verizon has led $1.1 trillion of dollar-denominated issuance this year, on pace to surpass last year’s record $1.47 trillion, data compiled by Bloomberg show.
Refinancings have cut the amount of speculative-grade bonds and loans set to mature in 2014 to $43.7 billion, compared with $331.5 billion when the Fed started its QE program in 2008.
StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with all (or any) of the views expressed by these outside parties.
StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.