Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.
DEUTSCHE BANK: These 11 indebted companies are most at risk from rising interest rates
DEUTSCHE BANK: These 11 indebted companies are most at risk from rising interest rates
Will MartinMar 11, 2018, 13:47 IST
Jerome PowellCarolyn Kaster/AP
With global interest rates on the rise, led by an ongoing tightening cycle from the US Federal Reserve, the era of ultra cheap money looks to be coming to an end.
Advertisement
Since the 2008 crisis, many companies have taken advantage of low rates, borrowing aggressively to fuel expansion.
Now though, with rates starting to rise, many companies have left themselves exposed to bigger interest repayments.
Some firms are more at risk than others, with companies on both sides of the Atlantic vulnerable to rising rates.
To examine which companies are exposed analysts at Deutsche Bank created what they call a "non-exhaustive list of firms with significant debt refinancing risks over the next few years."
Advertisement
Measuring using the companies with the highest ratios of debt to EBITDA (earnings before interest, taxation, depreciation, and amortisation - a key measure of balance sheet strength) Business Insider took a look at those firms most open to damage from rising rates.
Take a look below (charts show the companies' stock performance over the last 12 months):
Freenet's debt to EBITDA rate is among the lowest on Deutsche Bank's list, but is still elevated. The company has around €600 million maturing in the 2020-21 financial year.
British high street pub icon Wetherspoons — whose founder Tim Martin is a big Brexit backer — has produced solid results in the two years since the vote, but needs to replace all its debt before the end of February 2020.
Cemex, the world's second largest seller of building materials needs to refinance at least 1/3 of its debt in next three years, with an average rate of 6%.
Michaels Companies, America's arts and crafts retail chain, has "$2.7bn of gross debt of which $2.25 is a variable term loan maturing 2020 at LIBOR+," according to Deutsche Bank.
The world's biggest brewer by some distance has a huge debt pile, thanks in part to the debt it took on in order to acquire SAB Miller, then its biggest competitor, in 2016. $23 billion of its $100 billion debt will mature in 2018-2020.
A major investor in residential mortgage-backed securities, residential mortgage loans, mortgage servicing rights, commercial real estate debt and related assets, 99% of Two Harbors' debts are based on the LIBOR rate, leaving them highly exposed to rising rates.
Party City, which sells party supplies has "$1.79B in gross debt which includes $1.2B variable term loan at LIBOR+ maturing 2022," according to Deutsche Bank.
Scientific Games supplies casinos and lotteries with gambling products and services. It has $8.1 billion of gross debt, of which $3.2 billion is LIBOR based.
Annaly, which is another large real estate investment trust, has 99% of its debt based on LIBOR. Deutsche Bank says its "book value hit by 5.8% for every 50bps change in rates."
