Higher interest rates have changed how Moody's assesses credit risk, according to Atsi Sheth, the ratings company's chief credit officer.
Sheth said leverage now carries more weight than it did previously, because the cost of servicing debt is rising. As borrowing becomes more expensive, companies with heavy debt loads face greater pressure on their finances, and that pressure is central to how the agency evaluates their creditworthiness.
The shift reflects a broader change in the credit environment. When rates were low, debt was comparatively cheap to carry, and a high level of leverage was easier to sustain. With higher rates, the same debt level translates into larger interest payments, which can squeeze cash flow and weaken a borrower's ability to meet its obligations.
For investors and borrowers alike, the comments signal that rating assessments are increasingly focused on how debt burdens interact with the current rate environment. Analysts following the sector will likely watch how this emphasis on leverage influences future ratings decisions across industries.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing