The financial burden on companies listed on the Ibex 35 index has surged by 32% over the past two years, reflecting the end of an era where borrowing costs were at historic lows.

The European Central Bank's (ECB) decision to raise interest rates from 0% to 4% was aimed at curbing rising inflation, a strategy that has been accompanied by increased financing costs for businesses, families, and governments alike.

Spanish firms, however, have learned lessons from past financial crises and entered this cycle of high rates with reduced levels of debt, allowing them to manage repayments without significant distress.

As of the end of 2024, the debt of non-financial companies listed on the Ibex 35 has risen to €157.648 billion, representing a 6% increase since 2022. Interest payments by these companies have escalated to €5.491 billion, reflecting a 31.9% increase.

The average interest rate for listed firms has climbed from 2.79% to 3.48%, an increase of less than 75 basis points, which stands in stark contrast to the reference rate hike of up to 450 basis points.

Despite the ECB’s efforts, including 150 basis points in rate cuts since last year, the impact on borrowing costs has yet to be fully realized, largely because corporate financing programs are less extensive than government borrowing.

Most corporate debt issuances in 2024 occurred in the first half of the year, and companies have leveraged significant liquidity buffers constructed during the pandemic, resulting in lower financing needs.

This cautious approach saw firms extending the average maturity of their debt portfolios to mitigate refinancing risks.

The year 2023 witnessed minimal corporate bond issuances as companies navigated high interest rates.

Telefónica provides a pertinent example of this trend, with an average debt maturity of 11.3 years as of the end of 2024, exceeding the nearly eight-year maturity of government debt.

Many companies, including Telefónica, have also expedited the sale of non-core assets to bolster liquidity.

As the market anticipates the potential conclusion of interest rate reductions, major Spanish firms currently exhibit a stronger debt repayment capacity compared to two years ago.

While debt has increased by 6%, interest payments have surged by 32%, leading to a 41.9% rise in profit for Ibex 35 companies, excluding banks and insurers.

The ratio of debt to EBITDA for non-financial firms remains manageable, sitting at around 2.4 for telecommunications giant Telefónica and 3.1 for energy company Iberdrola.

More leveraged entities such as Colonial and Merlin are seeing their ratios climb significantly.

Certain companies, such as Acciona and its renewable energy subsidiary, have experienced particularly steep increases in interest payments, tripling their expenses in the last two years due to extensive investments.

Acciona’s debt reached €7.128 billion by the end of 2024, a 30% increase since 2022, while its energy division’s liabilities doubled to €4.076 billion.

In response to concerns over credit ratings, these companies have offloaded strategic assets worth €1.293 billion in late 2024 to improve their financial positions.

Endesa, another key player, reported a 120% increase in its financial burden to €334.8 million over the last two years, despite reducing its total debt by 14% to €9.3 billion.

This paradox arises from increasing financing costs, with the average interest rate moving from 1.4% at the end of 2022 to 3.6% currently.

The decrease in liabilities reflects strong cash flow bolstered by divestments in solar energy plants, leading to revenues surpassing the amounts spent on investments and dividend payments.

Aena, the airport management firm, has also shown resilience, reducing its debt by 11.6% to €5.498 billion while facing rising costs, registering an interest rate increase to 2.54%.

Concurrently, it announced a record dividend after recovering from the financial impacts of the COVID-19 pandemic, supported by a solid balance sheet and a robust liquidity position.

Iberdrola continues to be the most indebted company within the Ibex 35, with liabilities reaching €51.7 billion.

The energy giant successfully maintained its average borrowing cost at 3.7%, slightly down from 3.76% a year prior, amid a strategic acquisition spree and record investment levels.

Conversely, companies like Enagás, Merlin, and Sacyr have kept financial burden increases to under 10%.

Enagás saw a significant reduction in debt, supported by the sale of Tallgrass, reflecting corporate strategies focused on optimizing financing structures in the current economic climate.