Private equity investors are increasingly pressuring CEOs to make more fundamental changes in their financial and strategic positions, and CEOs themselves appear to have already shifted their focus somewhat from compliance issues to building their businesses more aggressively through increased capital expenditures and increased cash-financed acquisitions.
Debt ratios may rise from their current low levels, and a modest slippage in corporate credit quality may result. Indeed, most forecasts call for a rise in default rates from their near-record lows. And while risk spreads for lower-rated bonds are up a bit this year, they do not suggest that debt investors are anticipating a significant deterioration over the near- to medium-term horizon.