According to the Bank for International Settlements, just half of 14,000 European and US companies with variable-rate debt were hedging their interest-rate risk at the end of last year, despite evidence that firms that hedge experienced a smaller negative impact on their interest coverage ratios and market valuations as rates rose.
This tallies with the findings of Chatham Financial’s January 2024 ‘State of financial risk management’ report, particularly that smaller companies with less robust interest-rate hedging practices have been disproportionately impacted by the rising rate environment.
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