While it may be true that the lower the EV/Ebit of a company, the more it is thought to be financially stable, it does not necessarily follow that financially leveraged companies
have higher EV/Ebit multiples.
Analysts expected another 150 bps hike in interest rate by the end of July 2019, which may bode well for Banks but certainly prove detrimental to highly leveraged companies
The increase in the State Bank policy rate by 150bps to 12.25pc an 8-year high - effective from May 21, coupled with exchange rate instability, will adversely affect balance-sheet of leveraged companies
similar to the time when sharp devaluation took place in the early 1970s.
Fitch expects to affirm the ratings for most LatAm reinsurers during the Outlook horizon, though a few highly leveraged companies
could be downgraded or assigned Negative Outlooks.
Although highly leveraged companies
might consider organizing outside of the United States to avoid IRC section 163(j), opportunities to do so may be limited and are likely to diminish over time due to Action 4 of the OECD/G20 Base Erosion and Profit Shifting Project, Limiting Base Erosion Involving Interest Deductions and Other Financial Payments (http://bit.ly/2tH2Tuv).
However, for leveraged companies
, the percentage difference between share values of TPT-based and DPT-based companies is smaller at higher rates [R.sub.A], although this difference reaches an asymptotic value of [mathematical expression not reproducible] percent; in our case it equals [approximately equal to]15.56%.
While a number of other evolving factors need to be considered in any assessment of the small-cap equity market, including everything from the impact of rising interest rates on leveraged companies
to the new curbs on interest-expense deductibility, we believe profitable companies - i.e., those actually positively impacted by the lower corporate tax rate - in general likely will be repriced higher as the market recognizes their potential for improved earnings momentum.
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
In addition to pumping cash into the economy, in October 2015 the central bank also threw a lifeline to leveraged companies
struggling to repay their loans in the form of basic Circular 135.
According to experts, unless the country's economic growth takes bigger strides, many highly leveraged companies
may continue to battle debt.
It will reduce the interest burden of leveraged companies
. Many highly leveraged companies
did badly relative to the rest of the market, and some of them are wellpoised to make the most of the lower interest rate cycle.