Business

Loose money era leaves trail of U.S. corporate debt junkies
NEW YORK (Reuters) - Many U.S. companies that gorged on cheap debt with forgiving terms over the last decade now find themselves shackled by it, spending much of their earnings paying off lenders rather than investing in their businesses or hiring. As small firms, which together account for half of U.S. employment, begin to feel the squeeze, this could have a chilling effect on hiring, wages and consumption, adding to headwinds from wobbly financial markets and ebbing global growth, economists and corporate finance professionals say. The number of companies struggling with their debt obligations is hovering near record highs. Some 17 percent of publicly-traded U.S. companies had trouble making debt interest payments at the end of last year, up from less than 10 percent in 2010 and off from a high of over 20 percent in 2016, according to the Institute of International Finance Inc, a trade group for financial institutions. In value terms, such firms account for a fraction of companies the IIF monitors. But they exemplify the struggles of a bigger universe of private firms which have loaded up on so-called leveraged debt, typically variable-rate loans offered on generous terms by banks and non-bank lenders. With Federal Reserve rate increases pushing up interest expenses and the U.S. economy facing a slowdown as it nears a cyclical downturn, more and more of those borrowers may scramble just to stay afloat. “It could reduce capital expenditures, capital deployment and lock up the economy, because companies could be so focused on making debt payments that they may not be hiring,” said Christopher Zook, chief investment officer of family office CAZ Investments LLC. Take CPI Card Group Inc, which makes credit and debit cards for banks and retailers. The card maker was among firms that tapped the leveraged loan market, when it borrowed $435 million for general purposes before it went public in 2015. CPI repaid some of the loan with proceeds from its public offering, but as its profits have deteriorated, the company
Randi Zuckerberg: Dad gave Mark the option to open a McDonald's franchise
The internet would be a very different place if Mark Zuckerberg had taken his father's offer to forgo college. Before Zuckerberg started at Harvard University, where he famously launched Facebook (FB) in his dorm room 15 years ago, his father gave him and his three sisters an alternative to school: open up a McDonald's franchise. "My dad, funny enough, right before each of us went to college offered us the options of going to college or like investing in a franchise and running it," his sister Randi Zuckerberg said in a recent interview with CNN Business' Laurie Segall. Featured in CNN's forthcoming documentary "Facebook at 15: It's Complicated" airing February 10, Randi Zuckerberg discussed what it was like for the siblings growing up in Dobbs Ferry, New York, about 22 miles north of New York City. While she said her parents had mixed feelings about Mark Zuckerberg dropping out of college, they supported all their children's decisions. "I think they were like 'Okay, you probably should have taken the McDonald's franchise money if you wanted a business. But, okay, this might be a second good choice,'" Randi Zuckerberg said. Of course, Facebook now has 2.32 billion monthly users around the world, and brought in $16.9 billion in revenue during its most recent quarter. Mark Zuckerberg is worth an estimated $65.3 billion. Randi Zuckerberg, who was an early employee at Facebook and headed up early live video efforts on the platform, is now the CEO of Zuckerberg Media, her own production company. Its portfolio includes a TV show for children about a tech-savvy girl named Dot, a pop-up experience for kids called Sue's Tech Kitchen and a Sirius XM Business Radio show about the latest technology trends. But before starting her own company, she left a job at a major advertising agency to join Facebook. She recalled flying to California for the first time ever to meet with the small Facebook team working out of a house in the suburbs and advising them on a new logo. Those were simpler days. Now Facebook is grappling with fo
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