Kraft-Heinz is just one of many companies exposing the United States’ corporate debt problems. The food empire has been drowning itself in debt, spending money it hasn’t earned yet.
Heinz took on debt when the ketchup giant agreed to be purchased for $28 billion in 2013 by a consortium including Warren Buffett’s Berkshire Hathaway and private equity firm 3G Capital. But just because Buffet is backing the food giant, that doesn’t mean poor decisions weren’t made when it comes to debt and equity. CNN even highlighted the problems with Kraft-Heinz, showing how some rather serious missteps have brought its bloated balance sheet into sharp focus.
Back in February, Kraft-Heinz posted a massive loss of $12.6 billion and warned that 2019 profits will tumble. It’s stock price plummeted 27% the next Friday following the loss posting. But this is all very similar to other major corporations having a massive debt load. Some have been liquidating fairly quickly.
Kraft-Heinz, the owner of Oscar Mayer, Velveeta, and Planters nuts, is now scrambling to raise the necessary cash to pay down its nearly $31 billion of long-term debt. The food giant slashed its dividend by 36% and announced plans to sell off brands, reportedly including the Maxwell House coffee business. “Its balance sheet has ballooned,” JPMorgan Chase analyst Ken Goldman wrote in a report late last week.
This is only one company that is helping shine a light on the corporate debt crisis that’s dissolving retailers right before our eyes. During the past decade, corporations in the United States have taken on a major debt load in the era of low interest rates. Much like private debt, the cheap money has caused the amount of debt to skyrocket, putting any company at risk during a profit loss. Kraft Heinz, for example, is sitting on $30.9 billion of long-term debt, up from $28.3 billion a year ago. That amounts to a sizable leverage multiple of 4.4 times the company’s 2018 adjusted earnings.
The mountain of debt continues to impair Kraft-Heinz earnings and other companies should take notice. We, as a nation, as companies and corporations, and individuals are not borrowing ourselves richer. In fact, quite the opposite.
Post Glass Steagall companies borrowed money at very low interest rates and bought back their stock in effect falsely raising its value. The Board Of Directors got bonuses for their enlightened leadership with the stock increase. These actions were once felony illegal and now are just merely unethical. The stock market is largely divorced from reality. I’ve come to the conclusion that everything is bullshit.
I agree: I came to the same conclusion some time ago. Nothing made sense: they said there was record employment but there was homeless people all over the streets; they said the economy was booming but everyone I knew was just hanging on to their jobs and seeing fewer people working with them.
The cost everything kept going up, especially education and healthcare. The only thing that was cheap was porn.
The economy became a holograph that is kept suspended in thin air by digital BS. If the computers keep working, the illusion keeps working. But take that away in a crisis, and it quickly becomes clear there is nothing there. Look at what happened in Katrina or elsewhere.The illusion gets swept away and all you see is dirt poor knee grows everywhere begging for crap. Where do they all come from? Where do they go when the “good times” are happening?
“If the computers keep working, the illusion keeps working.”
Didn’t we see that in the ‘Wizard of Oz’? Played large scale the outcomes will be far more devastating and we’ll never get back to Auntie Em in Kansas.
Now the corporate debt holders are creating an electronic trading platform for just corporate debt; you can expect it to be opened up to traders and the public before any Crash. LOL !!! 🙂
Yeah Kevin, it IS all b.s. Frank Thoughts’ reply is a good one as are the examples of what is real he mentions. We’re all being played for fools if we give credence to any of the reports that are constantly coming out over the news wires. There is no recovery. Prices keep going up, the ability to save going down, assets are decreasing in value such as homes while people struggle to tread water at wage levels that have not kept up with all the increases. Taxes…. all up (regardless of the supposed tax cut). Right and left are the on the same side. What it is going to take is that ‘reset’ we’ve all spoken of. So many people, families… are going to be hurt and hope itself will disappear for quite a while.
Agree: it is the re-set that worries me. I lived through three of those in the 1990s in former communist countries. It was HELL. People were utterly punished and there was a big die-off of some segments: men over 40, old people, wayward teens.
The people who thrived were ruthless and violent men, sexy women who could trade booty for booty. That’s the human condition.
Anyone think there’s a chance of Glass-Steagall being reinstated? Or is there too much mud slinging going on for them to notice that people–the voters–are being crushed in this mess.
Aw Nuts! looks like they’re in a BIG PICKLE!
I like the Heinz/claussen pickles. When I finish a jar I’ll boil up ’bout a dozen eggs, peel them and drop them into the brine of the now empty jar. I can usually get about eight eggs in there with the lid on. I also, (if I got them) drop about a dozen sliced jalapeno in with them, let them sit for a week, and then get into them, they make a great snack.
Great tip on homemade pickled eggs, thanks.
BTW, I keep them in the fridge, I like ’em cold. Most times I sprinkle some J-O spiced crab seasoning on the eggs when I get into them.
A dozen eggs plus the brine in a pickle jar? I don’t think a dozen will fit. BUT, what the heck this sounds delicious. I’ll try it with 4 or 6 eggs to be sure I like it before I go with larger quantities. Thank you for the tip.
Everything will be ordering online which will be controlled by big brother noticed I said controlled ……
How long will it take me to get my ketchup and pickles if I have to order online?
Looks as if that horse face ass Kerry can’t get another face lift with dividends getting slashed…awww! Let the sob’s crash I buy brooks ketchup anyway!
Nothing you can make from your own tomato would lead you to believe that Heinz is in literal competition with anyone, short of a govt enforced famine.
Oh no, what will John Kerry do now? Unlimited funds are now limited…
Buy Hunts ketchup it’s less money.
Yes and get the Hunts 100% natural! No hfc in it unlike hienz’s toxic crap. And A-1 is much better than hienz 57.
Pickapeppa original sauce owns all that A1/57 stuff !
After the US and Europe imports
the last remaining immigrant dirtbags,
gives them $70k per year each
in entitlements and services,
and loads them up with $100k each
of personal debt,
then the planetary monetary system
can finally crash – all at once.
Too much greed for higher profits is killing the golden goose aka the people. We are in backwash territory as a nation.
Excessive government debt.
Excessive corporate debt.
Excessive consumer debt.
What could go wrong?