US companies cut debt in Q3 2023

US companies cut debt levels in the third quarter with the total for nonfinancial companies rated investment-grade by S&P Global Ratings falling below $6 trillion for the first time since 2022.

Total debt fell to a four-quarter low of $5.927 trillion, down 5.4% from $6.268 trillion in the second quarter, according to data from S&P Global Market Intelligence.

Lower-rated companies followed the same path. The total debt held by nonfinancial US companies rated non-investment-grade fell to a five-quarter low of $2.725 trillion, down 6.5% from $2.914 trillion in the second quarter.

The information technology and consumer staples sectors led the way with double-digit percentage declines, whereas debt increased for energy and segments of the utilities and real estate sectors.

Debt-to-EBITDA

The declines meant debt was largely stable relative to EBITDA. The median total debt-to-EBITDA ratio for nonfinancial US companies rated investment-grade fell slightly to 2.67 in the third quarter from 2.68.

For companies with credit ratings lower than BBB-, the ratio rose slightly to 2.86 from 2.81 despite the fall in total debt.

Bond issuance

The scaling back of debt has not stopped companies from issuing new bonds.

As of Nov. 16, total issuance by US nonfinancial companies for the year stood at $599.82 billion, already more than the full 2022 total of $516.19 billion despite multiyear high interest rates increasing the cost of borrowing.

However, total issuance in 2023 so far remains well below the pandemic-era borrowing rush fueled by ultra-low rates.