NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases research which examines the coronavirus’ (COVID-19) impact on corporate credit.
The pandemic has severely impacted the global economy and financial risk profile of many corporate debt issuers. KBRA believes the slowdown in economic activity will translate into the lowest growth in global GDP in over 30 years, as world economies deal with shuttered businesses and regional quarantines.
The impact of these aggressive population isolation strategies will be widespread, and many companies could experience financial distress. Some companies have already started to plan for the slowdown by drawing on unused bank lines and revolvers. This seems to be a prudent strategy given the current market landscape, as it allows these companies to deal with short-term liquidity issues. However, this may increase the debt burden of these companies, which could result in higher default risk over the longer term as debt service obligations increase. The daily ramifications of the virus are ever-changing, with the seemingly outsized reactions throughout the global capital markets.
While it is impossible to forecast when and how the current situation will be resolved, there are certain data points that may provide an early indication of the health of the corporate debt market and individual issuers.
To view the report, click here.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.