IMF warns Corporate Debt is $27Trillion timebomb
Key Sections of this AFR article:
The Washington-based fund also warned that companies had responded to ultra-low interest rates and plentiful liquidity by taking on levels of debt that risked becoming a $US19 trillion ($27.7 trillion) timebomb in the event of another global recession.
In it's half-yearly update on the state of global financial markets, the IMF said almost 40 per cent of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service from corporate cash flows if there was a downturn half as serious as that of a decade ago.
"The search for yield in a prolonged low-interest-rate environment has led to stretched valuations in risky asset markets around the globe, raising the possibility of sharp, sudden adjustments in financial conditions," the IMF report warns.