"With a $4 trillion mountain of debt maturing over the next five years, corporate America's reliance on cheap cash is about to get tested.US corporate treasurers have rushed to lock in cheap borrowing costs in advance of the expected rate rise, refinancing more than $1 trillion each year between 2012 and 2014, according to Standard & Poor's."Tighter borrowing conditions will mark a turning point in the recent debt binge. Companies have had easy access to cash to write checks for multibillion-Dollar takeovers, to fund buybacks and dividend strategies – all welcomed by investors as share prices rallied off 2009 lows."But as rates turn higher, investors may see the flip side of cheap financing. Analysts warn companies will begin defaulting in greater numbers, particularly in the energy sector, which has found itself in the line of fire as commodity prices languish."
"Moody's and S&P warn that defaults are likely to increase in the coming years as interest rates rise, a concern echoed by bond funds such as Pimco.Analysts with S&P expect defaults among junk-rated US companies to hit 2.9% by June 2016, nearly twice the rate in 2013."Moody's list of companies rated B3 with a negative outlook or lower – its lowest rating rungs in the 'speculative' space – eclipsed 200 for the first time since 2010 in July."Corporate earnings have started to plateau this year. And share prices are no longer steadily rising as they have been since the last bear market bottomed in 2009."