June 19, 2023 9:30 p.m. | Read in 2 minutes
billionaire venture capitalist chamas parihapitiya expressed concern about the large-scale debt wall problem for American companies, saying refinancing will be a problem for many companies that have taken on large amounts of short-term debt under the pandemic’s low-interest-rate regime.
Palihapitiya believes that interest rates will stay high for a long time, and the most underreported problem in business is that it will put American companies on the brink of massive debt. This is important given the fact that: federal reserve Chair Jerome Powell Inflation has not actually fallen and has not responded well to existing rate hikes, he said.
“It turns out that companies have issued massive amounts of short-term debt at near-zero interest rates during the pandemic. Will need to refinance ‘interest rates are high’, says Parihapitiya Said on his tweet. He said it puts a lot of pressure on companies when large amounts of debt come due at the same time.
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In fact, most of the companies that borrowed short-term during the low interest rate regime during the pandemic could not have anticipated the Fed’s slow but aggressive cycle of rate hikes to deal with the highest inflation in decades. is. But if these companies are forced to refinance their debt at higher interest rates, their funding costs will rise significantly. As such, it could be a matter of life and death for many of these companies.
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chance: “Be prepared for many companies to be unable to refinance their debt, and as a result, their equity value will disappear. It will be a very serious blow to the private equity industry,” Palihapitiya said.
Ultimately, this would also create an opportunity for those with capital on the sidelines to act as buyers and round up the goodness of these companies, he argued.
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