Moody’s says the prolonged high-rate environment has changed how it assesses credit risk, placing significantly more weight on corporate leverage. Firm-specific factors—including leverage, interest coverage and refinancing needs—are now primary drivers of default risk, more so than in low-rate eras.
Higher borrowing costs make it harder for companies to service and refinance existing debt. Moody’s says the maturity wall has become a persistent challenge, increasing credit risk for highly leveraged firms facing near-term debt rollovers.
The shift puts corporate capital structures under greater scrutiny and could lead to rating adjustments for highly leveraged companies.