Little change in corporate leverage amid lack of incentive, S&P says

New York, July 19 - U.S. corporations have done little to reduce their debt during the current economic upswing as they have had little reason to do so, according to Standard & Poor's.

"Many companies have taken advantage of low rates by refinancing debt and in some cases they improved their near-term liquidity by pushing out maturities," John Bilardello, Standard & Poor's managing director and head of global industrial and energy ratings, said in a news release. "But to say that companies have used their increased cash flow to delever balance sheets would be, on the whole, inaccurate."

Since 2000, total debt has risen "modestly" while leverage has not changed significantly, according to an S&P study.

"Companies have had little economic incentive to reduce debt since the interest rate environment has been so favorable," Bilardello said. "We have recently seen a few companies move to redeem debt, but we suspect the pressure to reward shareholders instead with stock buybacks and higher dividends will remain the first priority."

He added that pricing power will be a "key factor" to monitor in coming quarters. For chemicals, forest products and metals companies the situation has improved but remains difficult for airlines, auto suppliers and merchant generators, he said.

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