These are the six most indebted companies in the world

A healthy balance sheet and balanced accounts are usually the objective of any economic actor: a State, a company or even a family.

Being in excess of debt is, after all, a way of putting the health of finances at risk.

However, there are companies and large conglomerates that need to borrow constantly in order to continue their business.

This is especially the case with capital-intensive companies such as the oil companies, which carry out dozens of explorations to find it before extracting crude oil from the subsoil. They have to invest a lot.

Or of the car brands in constant innovation to manufacture better engines or safer cars in the event of an accident.

Others, such as pharmaceutical companies, invest years to develop new medicines.

If we look at the case of Netflix, before being able to fill the streaming platform with series and movies, it has to pay actors, producers, screenwriters…

“Netflix continued to increase its loans to finance content creation, although its balance sheet is much healthier today than in the past, as evidenced by superior credit ratings,” says a study by Janus Henderson Investors.

And for all this, money is needed. Much.

It is no coincidence that the 10 most indebted companies in the world, according to the Janus Henderson report, belong to sectors where a lot of research is necessary, where innovation is key or where competition is fierce.

In the top positions of the ranking we find the automotive companies Toyota and Volkswagen with a net debt in 2021 of US$186,000 million and US$185,000 million, respectively.

They are followed by three telecoms providers AT&T, Verizon and Germany’s Deutsche Telekom with $182 billion, $174 billion and $153 billion of debt each.

For comparison, these figures are similar to that of the entire public debt of Norway in 2021 (US$176 billion) or that of Colombia (US$171 billion) in the same year.

At No. 6 is another well-known car brand: Mercedes-Benz, which had $109 billion of outstanding debt on its balance sheet last year.

If we look at countries, Mexican companies accumulate US$36,000 million in debt, while Colombian companies owed some US$20,000 million until June of this year.

Those of Chile, US$12,000 million.

“Emerging market companies owe relatively little, reflecting more volatile economic conditions,” say Janus Henderson analysts Seth Meyer and Tom Ross.

But while debt always indicates a company’s financial health, having a lot of it isn’t necessarily a bad thing.

There are industrial sectors, such as car manufacturers or telecommunications companies, that need a lot of capital to function.

“Companies need to borrow money because in many sectors companies have the need to grow. Investment always requires financing, which can be via more capital, money from partners or loans,” Pedro Aznar, Professor at the Department of Economics, Finance and Accounting of the ESADE Business School.

For the professor, debt is a good option as long as the expected return on investment exceeds the cost of debt, something that has been common in some sectors, with such low interest rates.

So is it bad to have a lot of debt?

It all depends, experts say, on the balance between the value of what a company owns and what it owes.

“It is a relative issue. Debt can be put in relation to the total assets of the company, to the value of everything it has. If a company has assets that can lose value, or of volatile value, debt is a risk Aznar says.

“But if a company has assets with a safe value that support its debt, a certain degree of indebtedness is not negative: on the contrary, it allows it to grow, and also to increase profitability,” he adds.

And since these figures are from the last fiscal year, it is likely that in the new economic environment, companies will begin to be more conservative in the way they finance themselves.

If profits fall, repaying loans can be more complicated.

And a rate hike -as we are seeing these months- also affects, since the interest on the debt rises and that damages the results.

“The fact of having to pay interest and principal when due makes debt riskier than equity as a source of financing for the company,” says Pierre Verlé, head of corporate debt at investment firm Carmignac.

“Slower global economic growth, including recessions in some parts of the world, is making companies more cautious,” Meyer and Ross estimate.

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