Moody’s report expects the ratio to climb up to 4.8% by the end of 2008 and above 5% during 2009. Forecasts for USA are even worse with bad debt over total debt ratio of at least 5.3% by the end of 2008 from below 1% currently. In Europe it will increase from 1.2% to 3.5%. America’s higher growth at higher leverage will justify this different behavior. European banks have been more cautious while funding companies as they were further penalized during the latest credit crunches linked with mid 90’s Russian and South-East Asian turmoil’s.

Subprime crisis is starting to show the negative effects of last years financing environment. Companies have been issuing bonds and subscribing debt taking advantage of the historical low level of interest rates worldwide. They have been funding their purchases and growth projects at lower costs but leveraging. It was part of the New Economy paradigm with high and sustainable growth of revenues and profits, low interest expenses, low unemployment figures… the first step of the XXI century’ economy.

However, the scenario is starting to change, prospects are getting darker and financial institutions are becoming more cautious. At the same time, the change of the accounting standards, moving into closer mark-to-market asset valuations, is pressing the financial and accounting departments of companies… plenty of challenges for a challenging year.