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April 10, 2008

All Business: Firms find out cheap debt now costs a lot

  • Many got caught in a goofy scheme — advanced by investment bankers — to leverage up corporate balance sheets.
    • By RACHEL BECK
    AP Business Writer

    NEW YORK — Companies that borrowed money during the boom times to finance takeovers, share buybacks and other adventures are discovering that what they thought was cheap debt is turning out to be very expensive.

    Adding massive leverage to corporate balance sheets didn't seem like a bad idea a year ago when the credit markets were awash with liquidity. Don't worry, companies said to stock and bond investors, the extra debt costs won't be a burden.


     
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