NEW YORK–Preparing for rising interest rates, U.S. companies refinanced approximately $100 million in loans during January, the largest monthly total in at least a decade, according to data released by S&P Global.
The Wall Street Journal said its analysis indicates borrowers in recent months have saved more than $1 billion in annual interest costs by renegotiating terms with lenders.
“The wave is being propelled by outsize investor demand for bank loans, floating rate debit investments that are prized because they tend to perform well in rising rate environments,” the Wall Street Journal said in its analysis. “The red-hot loan market has enabled many corporations to demand that lenders cut rates or face losing the business to a rival, a sign of how easy financing is enabling large firms to get advantageous terms in debt markets.”
The risk, the Journal reported, is that borrowing costs are actually dropping and that the “feeding frenzy” pushes spreads so low that investors no longer earn enough income to offset the risk of default.