According to data by investment firm Janus Henderson, the ten companies with the highest net debt in 2021 are responsible for 17 percent of the total corporate net debt of $8.1 trillion this past year. The biggest borrowers in the past fiscal year came from two industry sectors in particular, as our chart shows.
Coming out on top are automotive companies Toyota and Volkswagen with a net debt of $186 billion and $185 billion, respectively. Competitor Mercedes-Benz had $109 billion of outstanding debts on its balance sheet this past year, while the rest of the top 8 is made up of telecommunication and utility providers like AT&T, Deutsche Telekom and Életricité de France. Although these numbers may seem high at first glance, high net debt isn’t necessarily a cause for worry, since taking out loans is seen as necessary for research, innovation and staying competitive.
Furthermore, net debt is calculated against cash or cash equivalents, meaning assets than can be liquidated on short notice, and doesn’t reflect the equity of the corresponding companies. Different industries also have different needs for short- and long-term loans, which makes evaluations across industry branches difficult. Nevertheless, it can be an indicator of a company’s financial health, especially when compared with competitors from the same sector, and shouldn’t overshoot a certain equity-net-debt-ratio.
As Janus Henderson analysts point out, the U.S. is responsible for more than half of the net debt of the world’s 900 leading companies. While net debt skyrocketed since 2015/2016, the investment firm expects borrowings to decline again due to “higher funding costs and an economic slowdown”, which often prompts companies to become more financially conservative.
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