A cyclist passes the Federal Reserve headquarters in Washington. REUTERS/Kevin Lamarque
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The Federal Reserve's historically low borrowing rate isn't benefiting corporate America like it used to. It's more expensive for even the most creditworthy companies to borrow or refinance even as the Fed has kept its benchmark at near-zero the last seven years. Companies have loaded up on debt. Companies have been using low interest rates to refinance more expensive debt, but the new debt isn't saving them as much as it used to.Companies saved a mere 0.21 percentage point in the second quarter on refinancings as investors demanded average yields of 3.12 percent to own high-grade corporate debt – about half a percentage point more than the post-crisis low in May 2013 .Interest coverage, an estimate of how many times a company could pay off its interest using its Ebitda, fell in the last year to a median 13.8 times from 16.7 times for companies with top credit ratings, excluding financial firms, who've issued debt, according to data compiled by Bloomberg.That compares with the 38 percent of companies that had interest coverage ratios between zero and 10 times in 2006, according to JPMorgan.Hosansky said the last time he felt that way was 2006 .Companies are trying to keep the cheap-debt party raging as long as they can.
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