They were once America's corporate titans. Beloved household names. Case studies in success.
But now, they're increasingly looking like something else — zombies. And their numbers are swelling.
From Boeing, Carnival and Delta Air Lines to Exxon Mobil and Macy's, many of the nation's most iconic companies aren't earning enough to cover their interest expenses (a key criterion, as most market experts define it, for zombie status).
Almost 200 corporations have joined the ranks of so-called zombie firms since the onset of the pandemic, according to a Bloomberg analysis of financial data from 3,000 of the country's largest publicly traded companies. In fact, zombies now account for nearly 20% of those firms. Even more stark, they've added almost $1 trillion of debt to their balance sheets in the span, bringing total obligations to $1.36 trillion. That's more than double the roughly $500 billion zombie companies owed at the peak of the financial crisis.
The consequences for America's economic recovery are profound. The Federal Reserve's effort to stave off a rash of bankruptcies by purchasing corporate bonds might very well have prevented another depression. But in helping hundreds of ailing companies gain virtually unfettered access to credit markets, policymakers may inadvertently be directing the flow of capital to unproductive firms, depressing employment and growth for years to come, according to economists.
"We have come to the point that we should ask, 'What are the unintended consequences?'" said Torsten Slok, chief economist at Apollo Global Management. "The Fed, for stability reasons, decided to step in. They knew they were going to create zombies. Now the question becomes, 'What about the companies that have been kept alive that otherwise would have gone out of business?"'