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S&PGR Rpt: US Corporate Cash Hoard Masks Increased Debt Burden

DOW JONES & COMPANY, INC. 8:24 AM ET 5/20/2016

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The following is a press release from Standard & Poor's:

SAN FRANCISCO (S&P Global Ratings) May 20, 2016--Cash is on the decline and
debt is decidedly on the rise for 99% of rated U.S. corporations, says a new
report from S&P Global Ratings titled "U.S. Nonfinancial Corporates' Record
$1.84 Trillion Cash Holdings Mask A Massive $6.6 Trillion Debt Burden."

Corporate America's most lucrative layer--the top 25 of S&P Global Ratings'
universe of over 2,000 rated nonfinancial corporations--collectively hold $945
billion in cash and maintain an enviable cash-to-debt ratio of 153%. This top
1% include familiar names such as Apple Inc.(AAPL), Google Inc., and Microsoft Corp.(MSFT)
However, this group's success masks a decade-low cash-to-debt ratio of 15% (an
aggregated $900 billion in cash and $6 trillion in debt) for the vast majority
of firms in the U.S.

"This is the result of an ongoing medium-term trend we've observed over the
past five years, and it's an important credit factor to pay attention to,"
said S&P Global Ratings credit analyst Andrew Chang. "Total debt outstanding
grew by about $2.8 trillion, while cash increased by only $600 billion in the
five-year period we're discussing. In 2015 alone, total debt outstanding grew
by about $850 billion, or about 50 times that of the cash growth."

The pronounced imbalance suggests an increased probability of corporate
defaults over the next few years, particularly in the vulnerable
speculative-grade spectrum. S&P Global Ratings forecasts a cumulative 5.3%
default rate by March 2017 for speculative-grade issuers, up from 3.9% in
April 2016 and higher than the long-term average of 4.8% over the past 31
years.

In prior years, S&P Global Ratings identified the practice of "synthetic cash
repatriation," in which U.S. companies issued debt as a proxy for bringing
back overseas cash earnings. And while the top 1% of rated firms are still
pursuing this strategy, the lower 99% have a more limited range of options.

"The top 1%'s immediate concerns center on what to do with their growing cash
pile. In contrast, the bottom 99% are more focused on new financing needs and
upcoming debt maturities," said Mr. Chang. "We believe that the top 25
companies are becoming more aggressive about issuing debt. We also believe
that these companies' significant cash holdings directly benefit from the
accommodating credit markets, and more limited access would likely have
curtailed shareholder returns."

The report notes that Apple(AAPL), for instance, issued $24 billion in debt in 2015
and has already issued $16 billion in 2016 to fund its share repurchases.
Technology companies in general, which had been debt averse as recently as a
decade ago, have become prominent debt issuers. In 2015, these issuers and
their peers in the top 1% added an additional $125 billion to their total
outstanding debt, far exceeding their cash growth. Speculative-grade issuers,
on the other hand, added $190 billion of extra debt to their balance sheet
and, as a result, now hold more than $8 of debt for every $1 of cash.

The reports are available to subscribers of RatingsDirect at
www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a
RatingsDirect subscriber, you may purchase copies of these reports by calling
(1) 212-438-7280 or sending an e-mail to
[e-mail]. Ratings information can also be found
on the S&P Global Ratings public website by using the Ratings search box
located in the left column at www.standardandpoors.com. Members of the media
may request copies of these reports by contacting the media representative
provided.

Primary Credit Analysts: Andrew Chang, San Francisco (1) 415-371-5043;
[e-mail]
David C Tesher, New York (1) 212-438-2618;
[e-mail]
Media Contact: Olayinka Fadahunsi, New York 212-438-5095;
[e-mail]


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(END) Dow Jones Newswires
05-20-160824ET