Greece is thousands of miles away. But the debt crisis of that country and others in the Euro-region have had implications for companies big and small here – especially those with low credit ratings. These companies have been unable to borrow money, either from banks or the public debt markets, because of the renewed concerns of leverage. Investors and banks worry about a borrowers ability to repay principal and make interest payments.
The chart above, which accompanies a story by Jodi Xu on Dow Jones Newswires, shows the drop off in issuance of new loans and bonds in the below-investment grade arena. As Xu noted in her story, just when confidence was returning to the markets earlier this year, along came the Greek debt concerns and the ripple effect touched here – even for companies with no link to what was going on in Greece.
In another interesting piece on Dow Jones Newswires today, reporters Michael Aneiro and Melissa Korn note that companies flush with cash have reshuffled their risk management priorities when it comes to cash management. Safety in the investments had been the big concern. Today, it is liquidity. And one like beneficiary of this shift – banks. That’s because companies have been taking money out of money market funds and putting it instead into things like certificates of deposit.