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Highly leveraged companies (with debt to equity ratio of more than 200 per cent or with negative net worth) had weaker debt service capacity than the rest.
On the monetary side, restricted credit in the local market and a hike in US Fed rate could be handled more efficiently by companies with sound balance sheets and stable operating cash flows compared to highly leveraged companies.
According to experts, unless the country's economic growth takes bigger strides, many highly leveraged companies may continue to battle debt.
One should focus on good quality companies, and one can take for example India, and avoid highly leveraged companies.
The entire economy was clogged till earlier this year and most of the bigticket deals that have happened this year have been stressed asset sales by highly leveraged companies.
When Northern Rock's demise in 2007 was followed by the collapse of Lehman Brothers the following year, the days of cheap nance and highly leveraged companies came to a spectacular and abrupt end.
Vitrano noted that he, chairman and chief executive officer John Standley, and president and chief operating officer Ken Martindale had experience managing highly leveraged companies when they came to the drug chain in 2008 from regional grocer Pathmark Stores Inc.
He added that despite this, highly leveraged companies and oil based stocks performed better on Tuesday.
The decision to increase the policy rate would hamper the recent positive trend at the local bourses and can see a short term pressure on stock prices for highly leveraged companies belonging to cement, select fertilizer and textile sectors
Highly leveraged companies and individuals who moved away from financial fundamentals will suffer the consequences.
As a result, I anticipate a rotation away from the stocks of highly leveraged companies with weaker balance sheets, to stocks of well-run businesses who can grow cash flow and earnings.
While many of these highly leveraged companies have generated free cash flow through the downturn, these companies will remain dependant on external sources of capital, requiring refinancing/negotiating with lenders.

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