February 2003
Finding ways out of the mire
For years companies leveraged up to boost shareholder returns. When the boom burst the disappointment of stockholders was as nothing to the wrath of creditors who have pushed companies to the brink. Some have pulled back, others are still teetering, only a few have steered well clear of trouble.
Balance sheet management has become a preoccupation
of nearly every corporate issuer of debt. If the plight of
credits such as WorldCom wasn't enough to scare finance teams
into decreasing leverage and enhancing liquidity, the ratings
agencies did the job. Keen to look as if they were responding
to events and to protect their own reputations, the credit
raters have made sure that any mavericks fell into
line.
That has applied across the board from triple-A rated frequent
issuers to fallen angels. GE Capital, for example, has been forced
to reduce its reliance on short-term debt and justify its leverage
levels. It is now faced with the task of bolstering its balance
sheet sufficiently to convince rating agencies that it deserves to
remain...
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