How Much Debt Can a Company Handle Before It Becomes a Problem?

Debt is a powerful tool in business. It fuels growth, funds research, and keeps industries moving forward. However, when debt spirals out of control, it can spell financial disaster. Some of the world’s largest corporations are carrying staggering amounts of debt—figures so high that they surpass the GDP of entire countries. But which company holds the most debt, and what does this mean for the global economy?

The World’s Most Indebted Companies in 2024

According to the latest financial reports, Toyota Motor Corporation tops the list as the most indebted company in the world. With liabilities reaching $217 billion, Toyota’s financial strategy relies heavily on borrowing to maintain its dominant position in the automotive industry. Following closely behind is Evergrande Group, a Chinese property giant drowning in $174 billion of debt, and Volkswagen AG, another automotive heavyweight, with $166 billion in financial obligations.

These figures highlight the scale of corporate debt in 2024, but the real question is: how sustainable is this level of borrowing, and what risks does it pose to businesses and investors alike?

Why Do Companies Accumulate So Much Debt?

Many corporations operate under the assumption that borrowing is a necessary part of growth. Debt allows businesses to invest in new technology, expand into new markets, and maintain operations during economic downturns. However, the current financial landscape suggests that many firms are taking on more debt than they can reasonably manage.

Key Reasons for High Corporate Debt:

• Expansion and Investment – Companies borrow to develop new products, expand into new regions, and modernise infrastructure.
• Mergers and Acquisitions – Large firms often take on significant debt to acquire competitors or invest in new industries.
• Stock Buybacks – Some companies borrow heavily to repurchase shares, artificially inflating stock prices while increasing financial liabilities.
• Survival Strategy – Struggling companies take on debt to stay afloat, hoping for future profitability that may never materialise.

The 10 Most Indebted Companies in 2024

1. Toyota Motor Corporation – $217 Billion

Toyota is the world’s largest automaker, producing millions of vehicles annually. Its debt stems from investments in research, production, and marketing. While Toyota remains financially stable, concerns over its slow transition to electric vehicles could impact its future profitability.

2. Evergrande Group – $174 Billion

Evergrande, one of China’s largest property developers, has struggled with a collapsing real estate market. Its mounting debt and inability to restructure effectively place it at high risk of default and bankruptcy.

3. Volkswagen AG – $166 Billion

Volkswagen’s push towards electric vehicles and supply chain disruptions have significantly increased its debt. The company continues to invest heavily, but market volatility and past emissions scandals have added to its financial burden.

4. Verizon Communications – $151 Billion

Verizon’s debt largely comes from major acquisitions and investments in 5G infrastructure. While 5G technology is expected to drive future growth, the company remains heavily leveraged.

5. Deutsche Bank – $150 Billion

Germany’s largest financial institution has faced years of financial scandals and restructuring. While it has avoided collapse, its debt remains a significant concern.

6. Ford Motor Company – $139 Billion

Ford has struggled with declining sales, supply chain disruptions, and increased competition. Downgraded to junk bond status, the company faces mounting financial pressure.

7. SoftBank – $138 Billion

SoftBank’s investments in high-risk ventures have led to substantial debt. Failed projects, such as WeWork, have only worsened its financial situation.

8. AT&T – $136 Billion

Once the most indebted company in the world, AT&T has managed to reduce some liabilities. However, its past acquisitions of DirecTV and Time Warner still weigh heavily on its financial position.

9. Deutsche Telekom AG – $115 Billion

The parent company of T-Mobile has aggressively expanded its market share, particularly in the United States. While these investments have driven growth, they have also led to significant debt.

10. Électricité de France (EDF) – $108 Billion

The state-owned energy provider faces financial difficulties due to reactor shutdowns and price caps. Government intervention is necessary to stabilise its operations.

The Rise of ‘Zombie’ Companies

A growing concern in corporate finance is the rise of ‘zombie’ companies—businesses that struggle to cover even the interest on their debt, let alone repay the principal. These companies operate at a loss and remain in business only due to continued borrowing or government support.

Recent studies estimate that nearly 7,000 publicly traded companies worldwide fall into this category, including major brands across retail, technology, and sports.

Notable Cases:

• Manchester United – The football club has been burdened with debt since the Glazer family’s acquisition in 2005, affecting investments in facilities and player acquisitions.
• Peloton – After a boom during the pandemic, Peloton’s financial troubles emerged, leaving it struggling with over $2.3 billion in debt.
• JetBlue – The airline doubled its debt over the past decade, focusing on stock buybacks instead of financial stability.

The Impact of High Interest Rates

With interest rates at a 20-year high, borrowing has become more expensive. The era of cheap debt is over, leaving many businesses struggling to refinance. As rates remain elevated, some analysts predict a wave of corporate bankruptcies in the coming years.

Governments are also feeling the pressure. The U.S. government expects to spend $870 billion on interest payments this year, surpassing its defence budget. Consumer debt is also reaching new heights, raising concerns about widespread financial instability.

The Future of Indebted Companies

With over $1.1 trillion in corporate loans due by the end of the year, many firms will face difficult choices. Some companies will sell off assets, while others may undergo drastic restructuring. The most at-risk businesses include:

• Telecom Italia – Selling its landline network to manage debt.
• iHeartMedia – Selling radio towers to reduce liabilities.
• Peloton – Cutting staff and restructuring operations to address financial instability.

If economic conditions do not improve, more companies will struggle, leading to job losses, reduced investor confidence, and potential global economic repercussions.

Final Thoughts

The world’s largest corporations are carrying unprecedented levels of debt, and for some, time is running out. While borrowing can be a tool for growth, excessive debt can lead to collapse. Whether through restructuring, asset sales, or government intervention, the financial future of these companies remains uncertain.

For businesses and investors, understanding the risks associated with corporate debt is more important than ever. As interest rates rise and economic conditions tighten, only those with strong financial management will survive in the years ahead.