Debt Overhang

Debt overhang is a situation in which a company or country has too much debt relative to its ability to repay it. This can lead to a number of problems, including:

* Higher interest rates: When a company or country has a lot of debt, it becomes more risky for investors to lend to them. This can lead to higher interest rates, which make it more difficult for the company or country to repay its debt.
* Lower economic growth: When a company or country is burdened with too much debt, it has less money available to invest in its businesses and economy. This can lead to lower economic growth, which makes it even harder to repay the debt.
* Financial crisis: In extreme cases, debt overhang can lead to a financial crisis. This can happen when a company or country is unable to repay its debt, which can cause a loss of confidence in the economy and lead to a sharp decline in lending and investment.

There are a number of ways to address debt overhang. One common approach is to reduce the amount of debt by selling assets or cutting spending. Another approach is to restructure the debt, which may involve extending the repayment period or reducing the interest rate. In some cases, debt overhang can be resolved through a government bailout.

Debt overhang is a serious problem that can have a significant impact on the economy. It is important for companies and countries to manage their debt carefully in order to avoid this problem.