Moody's Re-evaluates Credit Risk Amid Rising Interest Rates, Executive Says
The higher cost of borrowing is forcing a greater focus on leverage, according to Moody's Chief Credit Officer Atsi Sheth.
Rising interest rates have fundamentally altered how Moody's assesses credit risk, emphasizing the increased importance of leverage, according to Atsi Sheth, the company's chief credit officer.
In an environment where borrowing costs have climbed significantly, the ability of companies to manage their debt has become a more critical factor in creditworthiness. Sheth indicated that the higher expense associated with interest payments means that leverage, or the extent to which a company uses debt to finance its assets, is now a more prominent consideration in Moody's evaluations.
This shift reflects a broader change in the financial landscape, where previously favorable borrowing conditions have been replaced by a more challenging interest rate environment. Companies that relied heavily on debt when rates were low may now face increased pressure to manage their financial obligations as the cost of servicing that debt rises.