Part 6/12:
Many surviving firms operate on "zombie" status—sustaining themselves through short-term debt without generating profits. These companies frequently attempt debt restructuring to remain solvent but often end up liquidating or filing for bankruptcy. Creditors are now recovering less than half of what is owed, revealing the fragility of these debt-laden firms.
The Credit Market Tensions
The distress extends into financial markets, with high-yield credit spreads widening sharply in 2025. Investors demanding higher yields reflect increased risk perception, driven by the multitude of defaults and bankruptcies. This concern isn't limited to corporate bonds; even US Treasury yields remain elevated, indicating widespread investor apprehension about potential sovereign default.