The Credit Edge by Bloomberg Intelligence Seix Fears More Zombie Borrower Distress as Interest Rates Stay High
Jan 22, 2026
George Goudelias, Chief Investment Officer at Seix Investment Advisors, delves into the rising crisis of 'zombie borrowers' as interest rates soar. He warns these highly-indebted companies, with weak cash flow, face growing pressure in the current market. They also explore the impact of private credit on traditional leveraged finance and identify risky sectors like tech and healthcare amidst poor covenants. Goudelias shares insights on attractive investment buckets and cautions about the consequences of loose underwriting in the private credit space.
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Cash Buffers Are Propping Up Growth
- Elevated cash buffers across consumers and investors support growth despite tight spreads.
- George Goudelias believes this dry powder helps explain why credit spreads tightened even with rising risks.
Fed Cuts Less Likely; Inflation Near 3%
- Seix expects inflation nearer 3% and limited Fed easing this year.
- Goudelias argues multiple rate cuts without a recession would be unprecedented and unlikely.
High Rates Keep Credit Zombies Alive
- High rates will keep pressure on weak borrowers and maintain elevated defaults.
- Goudelias warns many 'credit zombies' generate zero free cash flow and face repeat restructurings.