Originally published Saturday, November 7, 2009 at 12:09 AM
Comments (0)
E-mail article
Print
Share
Big companies hesitant to dip into cash
In the summer of 2008, steel giant Nucor decided to raise some cash. It issued new shares of stock and floated some corporate bonds. As financial markets crumbled, the company ignored pleas from some investors and analysts that it buy back shares, which now are selling for about half their peak. Today, as a result, Nucor has a $2.2 billion cash horde — and one year into the great recession, Chief Executive Daniel DiMicco is sitting on it.
The Washington Post
In the summer of 2008, steel giant Nucor decided to raise some cash. It issued new shares of stock and floated some corporate bonds. As financial markets crumbled, the company ignored pleas from some investors and analysts that it buy back shares, which now are selling for about half their peak.
Today, as a result, Nucor has a $2.2 billion cash horde — and one year into the great recession, Chief Executive Daniel DiMicco is sitting on it.
"Everything is still on hold because we don't have a lot of confidence that the right things are being done in Washington to reinvigorate the economy," said DiMicco. "We're keeping our powder dry."
Nucor isn't alone. The balance sheets of large U.S. corporations are for the most part in good shape. Many big companies have piles of cash on hand and credit markets have thawed so that they can raise new funds. Between Jan. 1 and Nov. 2, U.S. corporations overall raised $740.8 billion by issuing bonds, up from the $522.2 billion raised during the same period last year and almost as much as the $779.8 billion raised in the go-go year of 2007.
But most U.S. executives lack enough confidence in the economy to expand their businesses. And as long as consumer spending is lagging too, that leaves the federal government straining to stimulate a recovery that is still struggling to gain speed.
"Cash is high. Interest coverage ratios are low. And big businesses are able to issue bonds pretty cheaply," said Mark Zandi, chief economist of Moody's Economy.com. "The concern is that they're not using those balance sheets, that they're not out investing or hiring. And until they do, the economy is not going to engage, and there is always the risk that we're going to fall back into recession."
Financial firms have been among the leaders in raising money to bolster their reserves. Citigroup, for instance, has nearly doubled its cash reserves to $244.4 billion. But top technology companies are flush too. Microsoft has $36.7 billion of cash and Google has $22 billion.
Executives have different reasons for their reticence. DiMicco is jittery about the future. From his vantage point, he said, companies have recently been restocking the supplies they normally have on hand but final sales are still languishing. "Whatever positive uptick there has been to this point has been an inventory correction, not a real improvement in demand," he said.
Other executives are still recovering from last year's scare when capital markets completely seized up and many companies were unable to borrow money at any price, threatening the ability to finance day-to-day operations.
"A lot of those funds are just being hoarded as cash because of the near-death experiences many businesses felt they were going through last year," said Edward Yardeni, chief investment strategist of Yardeni Research. "Companies dodged that bullet, and now they want to make sure they have a bulletproof vest."
While big U.S. companies are having relatively little trouble finding cash, smaller firms aren't faring as well. Unable to sell corporate bonds to investors because they are too small or because they are privately held, small and medium-sized companies rely heavily on bank loans — and banks haven't been lending as freely as before.
That's important for job creation, said Zandi. He said that businesses that employ fewer than 20 people account for 25 percent of U.S. employment, but accounted for 40 percent of the job losses during 2008.
UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case
UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip
UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award
UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall
NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook
More Business & Technology headlines...
![]()

Entertainment | Top Video | World | Offbeat Video | Sci-Tech
general classifieds
Garage & estate salesFurniture & home furnishings
Electronics
just listed
Adorable Bull Terrier puppies for good home...
AKC Great Dane Puppies Ready
AKC PAL/ILP Registered Labs
More listings
POST A FREE LISTING
- Lakewood cop accused of embezzling $150K meant for slain officers' families
- 3 big health insurers stockpile $2.4 billion as rates keep rising
- Agency set to investigate handling of 911 call about Josh Powell
- Quick decisions: How Washington hired its new football staff
- Social worker recounts minutes before Powell fire
- Historic day for gay marriage as another fight looms
- Justin Wilcox's versatile defensive style is the right fit for Huskies | Jerry Brewer
- It's Terrence Time: Enigmatic Ross leads Huskies
- $25B settlement reached over foreclosure abuses
- Council members get briefing on arena proposal, minus details
- Gay-marriage bill passes House, awaits Gregoire's signature
493 - Wanted in Seattle classrooms: more teachers of color
385 - Council members get briefing on arena proposal, minus details
308 - AP Source: Obama to change birth control rule
296 - Oregon live game thread
155 - Worker: Josh Powell told son he had 'surprise'
108 - Rough road again
105 - USA Today further spells out how Mariners, handful of clubs next in line for huge cash windfall
74 - A few late-night notes
72 - Marijuana legalization initiative set to go on Nov. ballot
72
- Wanted in Seattle classrooms: more teachers of color
- State Medicaid program to stop paying for unneeded ER visits
- 3 big health insurers stockpile $2.4 billion as rates keep rising
- Economy, blogs give survivalists new reason to look to Northwest
- State's share of mortgage settlement: $648 million
- Bellevue College adds a third bachelor's degree program
- One man's audacious pursuit of sailing history
- Darren Berg gets 18-year sentence for Ponzi scheme
- $25B settlement reached over foreclosure abuses
- 'Gauguin and Polynesia': dazzling mix-and-match | Art review
