Corporates Face Novel, Greater Risks from Debt Ceiling Impasse—Even if No Default Occurs
Cleary Gottlieb – As the threat of an unprecedented default in U.S. government debt plays out over the coming months, the United States is in uncharted territory. And so are directors and management teams at government contractors, whether public or private. While there have been a number of actual and threatened “government shutdowns” in recent years, and government agencies and executives have experience navigating them, a market perception of a credible default risk on U.S. debt (even short of an actual default) would be a new scenario for which no one has a playbook. But parts of the financial markets are beginning to notice in small ways the lack of legislative progress and the broader financial markets may react in the coming months with implications for corporate capital raising, liquidity and risk management.