There are about 4500 publicly listed companies in the US, and about 16% are zombies, see chart below. A zombie company is a firm that has existed for ten years and had an interest coverage ratio of less than one for more than five consecutive years. After the financial crisis in 2008, interest rates were kept at zero for a decade, and low borrowing costs made it possible for many firms to continue to operate. With high inflation and rising interest rates, the number of zombie firms is likely to come down as the costs of capital continue to rise. For more discussion see this Fed publication and this BIS publication.
Source: FactSet, Apollo Chief Economist. Note: A firm is a zombie if its interest coverage ratio (ICR) has been less than one for at least 5 consecutive years and the firm is at least 10 years old. The last observation is 2022Q2.
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