16 Worrisome US Corporate Debt Statistics for 2023
Updated · May 20, 2023
Most people don’t exactly covet the prospect of debt—on the contrary, they endeavor to stay free of it. When it comes to businesses, however, owing money is more or less the norm, be it in the form of loans, credits, or bonds.
Managing debt correctly is, in fact, an essential part of doing business. While a company with too much debt could potentially fail to make interest payments and go bankrupt if earnings drop irreparably, a company with no debt is likely overlooking expansion opportunities.
In the present article, we’ll take a detailed look at some important US corporate debt statistics and analyze them in view of the pandemic.
Key US Corporate Debt Facts (Editor’s Choice):
- Bond issuance in 2020 stood at a record $2.275 trillion.
- April 2020 alone saw $329 billion worth of bonds issued.
- Global corporate debt stands at $86.1 trillion.
- As of 2021, the outstanding debt of nonfinancial corporations in the US was $17.7 trillion.
- The rate at which debt grows nearly doubled in 2020 from 5.5% to 9.1%.
- Sustainable bonds hit $859 billion in 2021.
- Long-term debt is up 164% compared to 10 years ago.
- The global bond market size has surpassed $128 trillion.
US Corporate Debt Statistics for 2022
It doesn’t exactly take an expert to presume that a global pandemic will likely lead to an increase in corporate debt across industries… and that’s exactly what happened.
Debt has steadily grown ever since the financial crisis of 2007-2008, but shot up even further in 2020. The implications and latest developments, we discuss below.
1. The total US corporate debt is $22.5 trillion.
Corporate debt in the US has nearly doubled since the financial crisis of 2007-2008, now standing at $22.5 trillion. It is worth noting that this number includes both non-financial and financial corporations, with the latter responsible for about a third. As of December 2021, non-financial companies had $17.7 trillion in debt outstanding. For comparison, it was $8.97 trillion in 2006.
Fun fact: In opposition to the US, corporate debt levels in the EU throughout the last decade have remained surprisingly stable at ~$13 trillion, though they did spike up to $15.8 trillion in 2020 due to the pandemic.
2. US companies have $10.5 trillion in outstanding bonds.
The debt we talked about previously includes all outstanding debt securities, that is, bonds plus debentures, notes, and deposits, but not direct loans. Here, we’ll go into a bit more detail: corporate debt statistics show that American companies presently owe more than $10.5 trillion just in bonds. Prior to the pandemic, outstanding bonds were $8.8 trillion.
3. Global corporate debt stands at $86.1 trillion.
As of 2022, corporate debt throughout the world has continued to grow, reaching $86.1 trillion. About 27% of global nonfinancial corporate debt is held by Chinese companies, and 37% by US and EU companies. Japanese corporations’ debt of more than $6 trillion is also substantial, particularly when compared to other major economies such as the UK ($2.3 trillion), India ($1.51 trillion), and Russia ($1.25 trillion).
Global debt was ~$40 trillion just over a decade ago but experienced a considerable hike post-GFC in what became known as the corporate debt bubble; it already stood at $75 trillion immediately before the pandemic, in Q1 2020.
4. Up to 90% of corporate bonds are callable at present.
Bonds can be callable and non-callable. As the name implies, callable bonds are redeemable at any point, that is, the issuer can “call” them and pay back the principal before the maturity date. Non-callable bonds do not allow for that. As US corporate debt has risen, so has the quantity of bonds throughout the years.
However, there’s one noticeable shift—callable bonds have surpassed non-callable bonds in popularity. A look back at 2005 shows that only 40% of bonds issued were callable; in 2020, 88% were.
This is likely due to the flexibility that callable bonds permit—companies can call them early and reissue more bonds at better interest rates, and investors obtain higher value on their principal (call value is generally above par value, especially early on).
Debt by Sector Statistics in the USA for 2022
Not all industries are created equal. It’s true that all of them have debt, but some owe a lot more than others.
This has changed over time. The IT and communication services sphere has recently moved up to the forefront, and so has healthcare; the industrial sector, on the other hand, now makes up a much smaller share of total debt among top businesses.
Below, we’ll analyze key industry-specific US corporate debt statistics.
5. Debt-to-EBITDA ratios have nearly doubled in certain industries.
(Source: Deloitte Insights)
EBITDA stands for “earnings before interest, taxes, depreciation, and amortization” and is one of the most useful measures in determining a company’s financial situation. In this regard, the debt-to-EBITDA ratio by industry allows us to better understand businesses’ ability to pay debts.
2020 hurt many companies’ earnings significantly, which directly influences their debt-to-EBITDA ratio. The energy industry was the worst performer, with its EBITDA declining 42.7%. This led to its debt-to-EBITDA ratio soaring to 4.9 (from 2.5 in 2019 and just 0.7 in 2010).
The average across the Top 1,000 rose from 2.2 to 2.5, which, while nowhere as sharp, is still significant.
6. Boeing raised $25 billion in bonds upon the pandemic outbreak.
(Source: The Intercept)
Business debt skyrocketed in Q2 2020 as companies scrambled to raise financing, and many had to cut thousands of jobs. Boeing had the option of a federal bailout but rejected it as that would have required the company to provide the government with an equity stake; instead, they decided to issue a record amount of bonds ($25 billion), offered to more than 600 investors. This was the sixth-largest bond offering in history.
Oracle, the world’s second-largest software company, was also second by the volume of bonds issued in 2020—$20 billion. A distant third was Disney, at $11 billion.
7. Sustainable bonds hit $859 billion in 2021.
Company debt is getting greener. We are aware a statement like this sounds a tad weird at first, but it actually makes perfect sense. You know how many people nowadays are growing increasingly conscious of our impact on the environment? Now, it’s true that businesses generally prioritize profit above all else, but if investors are willing to invest in “green” activities, why not integrate that as part of company undertakings? Whence, sustainable bonds.
They come in three categories: green, social, and sustainability. The company issuing them has to guarantee the money raised will be used in an environmentally or socially conscious way. All three have seen lightning growth since 2020 and have increased in value several times over. Commercial debt based on sustainable bonds in 2019 stood at less than $250 billion, but rose to $534 billion in 2020; another year later, in 2021, companies borrowed $859 billion in environmentally-friendly bonds.
8. Ford Motor Company to offer $1 billion in green bonds.
Ford has had quite a rough going ever since the 2007-2008 financial crisis. Up until 2010, Ford bonds were junk-rated, and even now only have a rating of BB, though the company is hoping to have them revised to investment-grade.
To this purpose, Ford is retiring $5 billion of high-interest COVID outstanding bonds (which it issued at 8% to 9.5% in April 2020) and launching $1 billion in green bonds to make up for it. Ford will offer these at 3.5% to 4%.
We already explained this, but we’ll reiterate: green bonds require a commitment to environmentally-friendly use of financing. Ford fits the bill as it has promised to convert a large portion of its business to EVs.
A Look Into the US Corporate Debt-to-GDP Ratio and How It Stacks Up Against the World
Up until here, we gave you tons of information on corporate debt, both within and outside the US. However, although numbers can be useful in many ways, so can some more relative statistics. In this section, we’ll look at debt in perspective, comparing it against the GDP of nations, and analyze the main trends.
9. The global corporate debt-to-GDP ratio shot up by 10% due to the pandemic.
While corporate debt as a share of GDP has been steadily increasing, particularly after the 2007-2008 financial crisis, it surged dramatically in the first year of the pandemic. Worldwide corporate debt stood at 91.8% of global GDP as of Q4 2019, but reached a record-breaking 102.5% in Q3 2020. It first broke 100% in Q2 2020, at 100.8%. It took more than a year for the number to fall below a hundred, which it did in Q2 2021—to 99.8%.
10. The US corporate debt-to-GDP ratio is far below the worldwide average.
(Source: RBC Wealth Management)
Once upon a time, this fabled ratio used to be low—about 20% low… but that was in the 1950s. Since then, it has gradually crept up ever so slowly, but quite steadily, up to ~40% in the nineties. Several ups and downs followed, but it wasn’t until 2010 that the debt bubble signaled a decade of definitive upsurge to more than 45% pre-pandemic.
Then the coronavirus happened, and it shot up to ~57%. That said, it’s not all doom and gloom. First of all, this spike was primarily caused by the drop in GDP itself; secondly, it has already started falling and now sits at ~52%, with analysts expecting it to follow a downward trajectory over 2022 and 2023 as the country’s GDP recovers.
An Overview of the US Corporate Bond Market for 2022
Corporations issue bonds to raise money. When the pandemic hit in 2020, businesses scrambled to come up with suitable bond packages, with most materializing in April of the same year. Since then, the situation has calmed down, and bond issuance has begun to normalize.
11. Corporations issued $2.275 trillion worth of bonds in 2020 alone.
Bond issuance in 2020 reached new heights and set an all-time record. Corporations issued bonds worth $2.275 trillion, with $329 billion (or ~14%) of that amount just in the month of April 2020. $1.85 trillion (~81%) were investment-grade bonds and $423 billion (~19%)—junk bonds (high-yield).
Put in perspective, 2020 saw a 60.4% increase in bond issuance compared to 2019.
12. YTD corporate bond issuance is down 10.6% compared to 2021.
As of February 4, $163.4 billion of bonds have been issued so far this year. On a year-to-date basis, this marks a 10.6% decrease compared to the same period in 2021, in which $182.7 billion worth of bonds had been issued.
The more striking stat has to do with the various types of corporate bonds—in 2022, junk-rated bonds have plummeted 47.8% in favor of investment-grade bonds, which have gone up 4.5% of the total issued.
13. Long-term debt is up 164% compared to ten years ago.
(Source: Deloitte Insights)
Long-term debt refers typically to debt that matures in more than one year; it also tends to have higher interest rates than short-term debt. Recently, US bond markets have been ripe with long-term bonds.
For instance, several billion dollars worth of the bonds that Oracle issued in 2020 have a maturity date of 2060. In fact, compared to 2010, long-term debt as a whole is up 164%, from $2.2 trillion to $5.8 trillion. It rose by more than $700 billion in 2020 alone.
14. The global bond market size has surpassed $128 trillion.
(Source: International Capital Market Association)
Nearly two-thirds of it consists of SSA (Sovereigns, Supernationals, and Agencies) bonds and about 32%—of corporate bonds. The USA reigns supreme, dominating both markets, but China is a close second. Japan comes in third place, having issued several orders of magnitude more SSA bonds than most other developed nations. The three countries constitute 62% of the SSA bond market. That said, Japanese companies don’t have a significant presence in corporate bond markets; instead, American and Chinese companies make up ~45% of it.
15. Nonfinancial debt to mature could reach ~$1 trillion by 2025.
(Source: S&P Global)
US corporations issued an immense amount of debt in 2020 to make up for the adverse effects of the pandemic. However, they didn’t stop there—the trend continued in 2021, though it diminished somewhat, urging financial experts to talk about a potential bond bubble. But there is an important distinction to be made. Companies issued further debt in 2021 not simply because of unsatisfactory revenues, but also to push back maturities. In other words, they are delaying the inevitable… and thus making it likely that in a few years’ time, by 2025, the total nonfinancial debt to mature could reach $968.5 billion, compared to $570 billion in 2022.
16. 72% of US corporate debt is rated as investment grade.
Debt comes in many forms, but simply put, it’s usually classified as either investment grade or speculative grade. The former is very much preferable and generally considered lower-risk. Speculative debt is often held by companies of poor credit rating and, as such, has a higher likelihood of default. Junk-rated (high yield) bonds are an example of this risk in corporate bonds. That said, the name betrays the fact they have their pros, such as higher interest rates to make up for the risk investors undertake by financing such companies. At present, only 28% of corporate debt across both financial and non-financial corporations in the US is speculative.
In the corporate world, debt is the norm. It is crucial for raising financing to support company operations or potential expansions of business activity. Considering the US is the world’s leading economy, it’s to nobody’s surprise that the country’s also very much in the vanguard of this debt-driven commercial world.
We hope our collection of US corporate debt statistics has been helpful in elucidating the current trends. Do keep in mind, though, that all information in this article is provided purely for informative purposes, and you should do well to consult a professional before investing in bonds.
A wayfarer by heart, Jordan fancies journeying into foreign lands with a camera in hand almost as much as he enjoys roving the online world. He spends his time poking at letters and pixels, trying to transmogrify them into something cool.