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In the realm of small-cap stocks, a significant financial challenge has emerged in the form of rising interest rates.  Paired with more levered balance sheets than their larger-cap counterparts, the cost of servicing debt appears a significant headwind for many of these companies.  In this white paper we explore the following topics:  

  • Small stocks have big debt burdens and high borrowing costs such that interest expenses are projected to consume nearly 20% of EBITDA this year.
  • This already high figure does not capture the impact of the debt that will need to be refinanced into a significantly higher rate environment, and interest expense could rise to over 30% of EBITDA by our calculations for small stocks in aggregate.
  • This incremental expense is likely to be a significant headwind for many small-cap stocks in the coming years and is a key risk that our Small/Mid Cap Quality & Value strategy seeks to avoid.

Download the white paper to learn more. 



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