As the specter of an unprecedented default in U.S. authorities debt performs out over the approaching months, the USA is in uncharted territory.
And so are administrators and administration groups at corporates, whether or not public or non-public. Whereas there have been a lot of precise and threatened “authorities shutdowns” in recent times, and authorities businesses and executives have expertise navigating them, a market notion of a reputable default danger on U.S. debt (even wanting an precise default) could be a brand new state of affairs for which nobody has a playbook. However components of the monetary markets are starting to note in small methods the dearth of legislative progress and the broader monetary markets could react within the coming months with implications for company capital elevating, liquidity and danger administration.
For firms that rely on functioning capital and mortgage markets for liquidity, it’s time for planning—each for potential dislocations that will come if traders and lenders start to understand a reputable danger of a default, and for the shocks that can come if a default, beforehand unthinkable, truly occurs.
Whereas this memo provides administrators and administration groups some ideas on actions they might want to take, to be clear, it’s our robust view that politicians on each side of the aisle have a accountability to the nation to resolve the debt ceiling deadlock promptly and earlier than the nation and the financial system are harmed. We hope they’ll accomplish that and make this alert memo irrelevant.
Please click here to learn the total alert memorandum.