The Strategist

Number of "zombie companies" in the United States is close to dotcom crash maximum

09/15/2020 - 03:40

In the United States, there has been an increase in the number of so-called zombie companies that do not earn enough to pay off debts. Only once during the observation period were there more of them - after the dot-com bubble burst.

Carlos Delgado
Carlos Delgado
In the United States, the number of so-called zombie companies unable to service debt obligations from their profits has approached the maximum since September 2000, writes the Financial Times.

The publication associates this with the measures taken to support the business, which made corporate borrowing more accessible.

Of the 3,000 US companies that make up the Leuthold 3000 Universe US broad market index, 15% are currently considered “zombies,” said Leuthold Group management company.

At the end of 2019, there were 13% of such companies, and at the end of the crisis 2008 - 8%. Only once there were more "zombie companies" - in 2000, after the collapse of the dotcoms; then their share reached 16%, writes the Financial Times.

“This really worries us, Leuthold Group portfolio manager Jun Zhu told the publication. More and more companies are accumulating debt, and the number of "zombie companies" is growing. What happens if capital markets suddenly dry up and they are unable to refinance or pay off their debt?”