Libor reaching point of pain for firms with high debt

New York

SHORT-term borrowing rates are rising to the point where some heavily indebted US companies can no longer ignore them.

A benchmark for near-term borrowing, the three-month US dollar London interbank offered rate, has risen above 0.75 per cent. That's a key threshold for junk-rated companies with about US$230 billion of loans outstanding, according to data compiled by Bloomberg - with Libor above that level, the borrowers will have to pay more interest over time. The increase so far could amount to about an extra US$230 million of total interest expense annually for the companies.