Episode Details

Every business faces a choice of using either borrowed money (debt) or owner's funds (equity) in financing its operations, and in this sessions I start by looking at illusory reasons for borrowing (debt is cheaper, higher ROE), real reasons for borrowing (tax benefits vs bankruptcy cost) and frictional reasons (desire for control, subsidized debt, protection from bankruptcy). To start my debt assessment for 2025, I look at both tax rates around the world and default during 2025. I then look at measures of debt burden, both in terms of comfort in paying off the debt (interest coverage ratios, debt to EBITDA) as well as debt level (debt to capital ratios) across sectors, in 2025. I end with a discussion of the coming together of two forces - huge investments in cap ex and the rise of private credit, and how if there is a big market delusion, a correction is forthcoming.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate7for2026.pdf
Blog Post:
Industry Averages, by Sector:
Global: https://pages.stern.nyu.edu/~adamodar/pc/blog/DebtIndustryGlobal2025
US: https://pages.stern.nyu.edu/~adamodar/pc/blog/DebtIndustryUS2025.xlsx

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