Debt threat: Number of highly-leveraged firms on the rise, reveals report

Some 7% of firms have more debt than equity.

The Singapore bourse is now home to a larger number of highly-leveraged corporates, according to the central bank’s latest financial stability review.

The share of firms with a debt-to-equity ratio greater than two times increased from 5.7% of listed corporates in 2Q14 to 7.0% in 2Q15. These firms accounted for 13% of total corporate debt.

Meanwhile, the share of firms with a debt-to-EBITDA ratio of more than four times has grown from 30% in 2Q14 to 36% in 2Q15. These firms accounted for 67% of total corporate debt

The median debt-to-equity ratio of SGX-listed companies has hovered around 40% since Q4 2013, after rising from about 30% in Q2 2009.

The share of corporates with both a debt-to-equity ratio of more than two times and a debt-to-EBITDA ratio of greater than four times has remained stable at 3% of all listed corporates. 

However, their share of corporate debt has risen from 8% in Q2 2014 to 10% as of Q2 2015. 

“Such firms would be most susceptible to debt repayment difficulties if interest rates were to increase or if earnings projections were not met,” the report said.