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Today the Things Have Changed hosts discuss corporate debt, why there is so much of it, and the dangers of it in our economy.

Corporate debt was already at historic highs even before the coronavirus crisis and now it's soaring at an unprecedented pace as companies scramble to ensure they have enough cash to weather the crisis. 

Despite warnings of widespread downgrades, defaults and bankruptcies from various ratings agencies, credit analysts and the Fed itself, bond spreads are narrowing. This  indicates a dangerous bullishness from investors as more of the U.S. economy opens for business. 

What if you are a company that's healthy and have an abundance of assets to collateralize, well you take advantage of these record low rates and borrow even more money just like Apple. 

• In May, Apple borrowed $8.5 B at a decade low rate of 3% even though they have $207B cash in the bank. Borrowing and yields have gotten to the point that if you're not borrowing, you're losing the opportunity cost of not borrowing cheap money. 
• Even Disney, the darling of the stock market, entered into a $5 billion credit agreement as it scrambles to bolster its liquidity to weather the fallout from the coronavirus crisis. 

The reality is that most businesses are not in a a healthy position and are trying to stay alive with shutdowns being enforced and revenue flows freezing up. 

In the coming months companies will have to make tough decisions and be strategic in how they use debt to stay afloat while minimizing the risk of bankruptcy. 

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