One-fifth of distressed bonds are issued by U.S. healthcare companies, raising concerns that healthcare is nearing a debt crisis as service providers struggle with higher interest rates and labor costs, the Financial Times reported Feb. 1.
According to Morningstar, healthcare is the second-most-represented sector on its "leveraged loan" gauge. These loans are sold by lowly rated companies with high levels of debt, meaning payout prices have grown as interest rates rise.
As debt climbs, the healthcare sector could have a more challenging time finding lenders and new sources of funding in a higher interest rate environment, according to the report.
Steve Caprio, head of U.S. and European credit strategy at Deutsche Bank, told the Times that the crisis means the healthcare sector can no longer be seen as "recession resistant."