Corporates can choose not to borrow

CFOs are in danger of becoming slaves of the leveraging cycle. It might be in their best interests to resist bankers' blandishments

Since roughly the middle of the year, bankers in the debt capital markets have been preaching to corporate CFOs that the time to re-lever has come. Not only is it financially rational to do so – given that interest rates and credit spreads are still historically low – it is inevitable: the markets will force companies to increase borrowing.

Equity investors are rewarding those companies that are pursuing mergers and acquisitions and are increasing capital expenditure.

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