US CFOs Consider How To Use Cash Reserves
U.S. finance chiefs aren’t sure what to do with the massive borrowed cash piles they’ve accumulated for pandemic relief, the Financial Times (FT) reported.
The numbers came out to $2.5 trillion borrowed by corporate America last year. But if the economy begins to recover as the year goes on, some chief financial officers (CFOs) aren’t sure what to do with their excessive fortunes, according to FT.
Companies in the U.S. S&P 500 index have built up an additional $1.3 trillion, as well, FT reported.
One option for these companies is giving the money back, which is favorable as many companies want to start the year off with less debt, FT reported.
Capital spending is a second option, with some investors looking for companies to spend more to grow business, especially while companies are able to get long-term debt financing at low rates, according to FT.
A third option, FT reported, is buying stock, which could please investors. In addition, this option could be useful as analysts predict big banks will spend around $10 billion this quarter on share repurchases after the Federal Reserve gave them the green light to do so. There could also be a spike in buyouts spurring from the cash raised through debt markets in 2020.
Lastly, FT reported a fourth option would be to hold onto the money. This could be a feasible option because of the still-uncertain economic climate, with the virus still raging out of control and no one knowing what will come next.
FT reported that it’s “never been cheaper” to borrow, with average yields on bonds by both riskier borrowers as well as safer investment-grade companies at record lows or close.
Some industries, like airlines and movie theaters, are still hemorrhaging cash as the pandemic continues to hit their industries hard, however. FT reported that those companies often need the loans.
PYMNTS reported that there are a record number of U.S. finance chief resignations, owing to pandemic-related stress and long hours that were already present.