Companies including Qantas, Wesfarmers and Myer may look to reduce debt balances to avoid future pain in the new interest rate normal world, writes Elio D’Amato.
The net outcome of higher rates is that it will cost companies more to raise debt financing, and this could have a deleterious effect on margins for already indebted businesses unable to pass rising costs on to customers.
This reporting season, investors will want to see companies with higher debt ratios focus on reducing that debt, which leads to the question: how do we measure a company’s debt exposure and whether it is “excessive”?
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Elio D'Amato is from the Australian & NZ team at data research firm Stockopedia.
