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Corporations are accumulating record amounts of Cash


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Interesting article, I wonder how this fits into the balance sheet ressesion senario.




U.S. companies are hoarding almost $1 trillion of cash, an amount Moody’s Investors Service says shows borrowers are still concerned the economy may tip back into recession.


Cisco Systems Inc., Microsoft Corp. and Google Inc. account for the biggest portion of the $943 billion stockpile, Moody’s said yesterday in a report. That’s up from $937 billion at the end of 2009 and $775 billion in the prior year. Companies have a ratio of cash to capital expenditures of 1.64 times, possibly an all-time high, the New York-based ratings firm said, compared with 1.1 times in December 2008.


Borrowers have bolstered their finances by slashing spending and raising cash, selling $945.8 billion of U.S. corporate bonds this year, following a record $1.23 trillion in 2009, according to data compiled by Bloomberg. While that’s helped corporate credit quality improve, a reluctance to use the money for hiring and investing until more signs of growth emerge isn’t helping shorten a “jobless recovery,” Moody’s said.


Announced equity buybacks of $276.3 billion this year have more than quadrupled from the first three quarters of 2009, according to Birinyi Associates Inc. Companies are also taking on more debt with buyout firms led by Blackstone Group LP announcing takeovers at the fastest rate since 2007.


Record Low Coupons


Bentonville, Arkansas-based Wal-Mart Stores Inc., the world’s largest retailer, sold $5 billion of debt in a four-part offering on Oct. 18 at some of the lowest coupons ever. The transaction included $750 million of 3-year, 0.75 percent notes that yield 30 basis points more than similar-maturity Treasuries and $1.25 billion of 5-year, 1.5 percent debt at a spread of 48 basis points, Bloomberg data show.


Microsoft, based in Redmond, Washington, sold $4.75 billion of bonds last month including $1 billion of 0.875 percent notes due in September 2013 and $1.75 billion of 1.625 percent debt maturing in September 2015.



On a micro level I am seeing serious deleveraging going on all around me. From the people that I talk about finances with to the small companies that I consult for, they all seem to be improving their balance sheets.





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