It has been just revealed the fact that an important billionaire says we can expect corporate America to hit a massive wall of debt. Check out the latest reports below.

Corporate America to hit a huge wall of debt

According to billionaire venture capitalist Chamath Palihapitiya, there may be a looming credit crisis that could cause significant financial damage to corporate America, amounting to trillions of dollars.

Palihapitiya previously cautioned that many of the country’s largest companies are facing an enormous debt burden, with payments due by January 2024.

In the latest episode of the All-In Podcast, Palihapitiya noted that the sudden increase in interest rates over the past year has put a lot of pressure on businesses that borrowed heavily during the pandemic’s peak, when interest rates were close to 0%.

Palihapitiya suggests that numerous firms in the real estate and private equity sectors may require assistance due to being over-leveraged, which could place them in a potentially risky position because of the substantial amount of debt they hold.

“There is a looming credit crisis in the United States… The debt wall that Corporate America is about to hit is pretty meaningful… A lot of these companies will have to thread the needle because if rates don’t go down materially in the next 18 to 24 months, these folks are going to be paying rates that they cannot bear.”

He continued and said the following:

“And they’ll probably go in to still breach a covenant of some of the debt. One thing that’s important here is that there are some very strict guidelines and covenants that debt issuers sign up for, and one of them is how much debt can I have as a percentage and/or as a multiple of my EBITDA (earnings before interest, taxes, depreciation, and amortization). So that’s a way bondholders govern the risk that you don’t overborrow.”

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