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Why Tech Sector’s Debt Craze Won’t Last

The view from the corporate treasury office in many tech companies recalls the Rime of the Ancient Mariner: Cash, cash everywhere and not a penny to spend.

As big tech companies continue to leave cash overseas rather than pay taxes to bring it back, they’ve increasingly resorted to borrowing money. This trend, fueled by record-low interest rates, highlights a broader comfort throughout the tech sector with debt—even among companies barely making money.

Now the question is whether the specter of rising interest rates—or hints that credit ratings could eventually come under pressure if debt levels keeps rising—will cause tech companies to pull back on debt raises.

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This is much more of a worry for a borrower like Netflix, which isn’t consistently generating cash and doesn’t have much in reserve, than it is for a richer company like Apple. It always has the overseas cash reserves to fall back on. It just may have to pay the taxes.

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Apple may have double its total debt to more than $80 billion by the end of 2017, which “would pressure the Aa1 long term rating given that Apple operates in a rapidly transforming technology sector,” Moody’s says.