Understanding The Impact of The Fed’s Interest Rate Cuts and Raises on Your Job and Employer

Dan Rayburn | Friday November 8, 2024 | 12:56 PM | Comments (0)

Fed interest rate cuts and raises directly impact your job and your employer. It is important to understand the correlation it has on companies being able to grow and invest in more employees versus having to cut back and do layoffs. During the pandemic, interest rates on the money loaned by financial institutions were so low, in some cases 1%, that businesses called it “free money.” In March 2020, the Fed cut interest rates to zero and held them steady for two years. With such low interest rates, companies could borrow capital and expand their workforce, invest in R&D, launch new products and services and push into new territories.

However, once the Fed started raising the interest rate, the short-term rate banks used to borrow from each other, many companies could no longer afford to take on capital and had to do more with less, leading to layoffs. Below is an example of the rate companies are paying who took on funding, and as you can see, the interest numbers are no where near what they were during the pandemic. Keep an eye on these interest rates going forward, they have a direct impact on your job and your company.

  • In April 2024, AMC Networks completed a cash tender offer to purchase outstanding 4.75% Senior Notes due 2025 and issued $875 million in new Senior Secured Notes due January 15, 2029, with an aggregate principal amount of 10.25%.
  • In January 2024, Fubo closed a privately negotiated exchange regarding some of its Convertible Senior Notes. The old notes were at a 3.25% interest rate, and the new notes are at 7.5% interest if paid in cash and 10% interest if paid in kind. This extended a meaningful portion of its debt maturities out to 2029 from 2026.
  • In May 2024, TelevisaUnivision announced that its wholly-owned subsidiary, Univision Communications, priced its refinancing of $1 billion of debt. This includes its offering of $500 million aggregate principal amount of 8.5% senior secured notes due 2031.
  • In May 2024, Charter Communications priced $3 billion in aggregate principal amount of notes consisting of $1.5 billion in aggregate principal amount of Senior Secured Notes due 2029. The 2029 Notes will bear interest at a rate of 6.1%.
  • In February 2023, Neptune BidCo US Inc., an affiliate of Nielsen, announced a private add-on offering of $500,000,000 aggregate principal amount of 9.29% Senior Secured Notes due 2029.

In the media, content, and cable industry, we have seen some interest rates as high as 16% on new loans and converting old debt to a low of about 5.5%. With the Fed having just announced its second rate cut this year, the hope is that interest rates will continue to go down, but it’s not guaranteed. All of this ties into the stability of your job and your company, and you need to watch the numbers and stay informed. Stay educated. The most valuable currency in the business world is (accurate) information.

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