Borrowing Binge: Takeover Trend Helps Push Corporate Debt And Defaults Upward --- Analysts Worry That Load Will Worsen Downturn In the Next U.S. Recession --- Reaping the Reagan Harvest?
Corporate restructuring left many American companies leaner in their operations but more heavily in debt. And now, a wave of stock buy-backs, corporate takeovers and sales of companies to their managements is pushing them even further -- perhaps dangerously -- into hock.</br></br>Already, the corporate debt in default is climbing rapidly. The 1981-82 recession raised it, just as you would expect: Annual corporate defaults climbed to more than $840 million from $60 million. But now, despite an economic rebound for more than five years, defaults have, perversely, soared. Last year alone, they reached a towering sum of nearly $9 billion.</br></br>To many analysts' surprise, even the Oct. 19 stock-market crash hasn't discouraged companies from increasing their borrowings. Right after the crash, many companies, despite fears of an impending recession, launched extensive programs to borrow funds and buy back their shares to try to shore up stock prices.</br></br>And in recent months, the merger-and-acquisition mania has broken out again; on Feb. 29 alone, more than $12 billion of takeover plans, mostly involving debt, were announced. Companies may be rushing to buy while the Reagan administration still keeps the antitrust watchdogs on a short leash.</br></br>The borrowing binge has many economists worrying about what may happen in the next recession, which most analysts surveyed by Blue Chip Economic Indicators, a newsletter, expect next year.