The total debt load among nonfinancial US companies with assigned credit ratings from S&P Global Ratings reached a new record in the third quarter, according to S&P Global Market Intelligence data.
Combined debt in the third quarter among all rated nonfinancial companies rose about 0.5% to $8.453 trillion, surpassing a previous record of $8.431 trillion in the first quarter. The increase was led by investment-grade companies, those with credit ratings of BBB- and above, which reported a record combined debt of $6.628 trillion in the third quarter. That was up from $6.493 trillion in the second quarter.
Companies rated below BBB-, meanwhile, actually trimmed their debt in the third quarter by about 4.7% to $1.826 trillion.
A runup in debt this year could be partially attributed to proactive refinancing activity as companies look to restructure large amounts of debt issued at low interest rates in 2020 and 2021 ahead of maturities in 2025 and 2026.
Debt by sector
Collective debt has grown for US investment-grade companies in all nonfinancial sectors except information technology and consumer staples.
Debt among non-investment-grade companies increased in six sectors and fell in four sectors. Consumer staples companies in the lower ratings group collectively added the most leverage in the quarter, with debt swelling to $88.80 billion from $58.70 billion in the previous quarter.
Diverging debt patterns occurred among consumer discretionary companies from the second quarter to the third quarter. The sector saw the largest increase in debt among investment-grade companies with a 24.46% rise, as well as the steepest decrease in debt among non-investment-grade companies with a 30.46% decline.
Debt-to-EBITDA ratio
Though total debt for investment-grade and non-investment-grade companies moved in opposite directions, median debt-to-EBITDA ratios rose for both groups of companies in the third quarter.
The median debt-to-EBITDA ratio, which measures debt as a share of EBITDA, for investment-grade companies grew to 2.69 in the third quarter from 2.58 in the second quarter. Within sectors, the ratio increased the most for healthcare companies with a nearly 20% gain and declined the most for information technology companies with a drop of over 13%.
For non-investment-grade companies, the median debt-to-EBITDA ratio edged up to 3.59 from 3.56. The increases were led by the real estate sector, which posted a 6.5% jump on the quarter to 6.63. The communication services sector recorded the largest drop, with its ratio falling 14.24% to 4.54.