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GSCW Day 6 Keynote: Bob Corker worries for America’s fading status

Never a better time for companies to refinance debt or borrow money

Former U.S. Senator Bob Corker is concerned about America’s global status as China ascends on the world stage with an autocratic government that moves decisively as the United States plays “shirts and skins” in a democratic system designed for bipartisan deliberation.

Corker, a Republican from Tennessee, retired from the Senate in 2019 after two terms. He spoke with FreightWaves’ founder and CEO Craig Fuller during Global Supply Chain Week.

“A lot of countries are looking at China,” Corker said. “Maybe they don’t like some of the things that they do. But some of them are finding them to be more reliable.”

The American brand is tarnished following the Jan. 6 riot at the U.S. Capitol where insurrectionists invaded the building where Congress was voting to certify the results of the Nov. 3 presidential election. 

A corrosive effect

“To see what’s happened to this beacon of democracy has damaged us tremendously,” said Corker, who chaired the Senate Foreign Relations Committee from 2015 to 2019. During that time, he visited nascent democracies that looked to the U.S. as the governing standard.

“We’ve been unipolar since [the fall of the Berlin Wall in] 1989,” Corker said.. Republicans and Democrats for years have embraced the idea that America’s role in the world was to be that leader. And when that is tarnished over time, it has a corrosive effect.”

Though he supported many of President Donald Trump’s policies, Corker was an outspoken critic of the president. Corker, elected in 2006, declined to seek a third term in 2018.

“The rhetoric that demeans, purposely sticking a stick in people’s eyes, has been very damaging. The coddling of non-democratic leaders has hurt us.,” Corker said without mentioning Trump by name. “Just the whole issue of breaking down alliances unnecessarily, just to do it to show that you can [was] very damaging to our country.”

A great time to borrow

Corker founded a construction company in 1978 that he sold in 1990, reaping tens of millions of dollars. He later acquired two of the largest real estate firms in Chattanooga, Tennessee, where he served as mayor from 2001-2005.

He joined Jefferies Financial Group as a special advisor in October 2020. From there, he has seen investor money pour in, making business loans plentiful with cheap interest rates.

“I think the one thing companies ought to be doing is borrowing as much as they can right now,” Corker said. “Our leveraging business is just going through the roof. The spread of high-yield debt versus standard debt is very narrow. So, any company today that thinks they may need to take on debt should be doing it right now. It’s never been a time like this.”

If not new borrowing, then refinancing to push out maturity of current debt is wise, he said.

“Everyone should be looking at where they are and refinancing because the market on high-yield debt is just incredible.,” Corker said. 

SPACs maturing

More broadly, Corker sees special purpose acquisition companies (SPACs) maturing over time. SPACs are shell companies given a blank check by investors to target a merger with a pre-revenue startup or growth stage company. SPAC sponsors typically get 20% of the outstanding shares for an investment of 3% to 4% of initial public offering (IPO) proceeds.

“Two years ago, SPAC was almost a dirty word. It has [become] an easy way to go public,” he said.

In the last 14 months, 437 SPACs with $143 billion in gross proceeds have been formed, according to SPAC Insider.

Corker does not see a bubble for SPACs like that with internet stocks in the 1990s or housing before the Great Recession in 2008.

“SPACs are getting much more sophisticated,” Corker said. “As they mature, there’s going to be less friction, less promote, less dilution. They are going to become even more appealing for people who are going public. As that happens, there won’t be as much money made on the SPAC side. But I think there will be greater certainty for folks with less friction.”

Fiscal mismanagement

However, underlying economic conditions that make borrowing rates and SPACs so attractive threaten the nation’s economic well being.

“Our biggest threat since the 2008 financial crisis has been deflation,” Corker said. “We’ve been doing everything we can as a county to keep deflation from harming our economies. It feels like to me there’s beginning to be some upward pressure. A little inflation, at least reaching the [2%] target, certainly could be very beneficial to our country.

“We have to be careful as a country. We’re not managing our fiscal matters — 100% debt to GDP  at a time when we don’t have a crisis,” Corker said. “The last time we were here was in World War II. Neither party seems to care much about fiscal issues any more.”

Evidence could be seen in the debate over coronavirus relief.

“Right before the election, you had then-Republican president outbidding Democrats on how much money we were going to send out to the public,” Corker said. “The lack of fiscal control eventually will be a problem for us. We’re moving to a place where we are threatening our status as being the world’s place to go.”

Disclosure: Corker is a minor investor in FreightWaves.

Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is a Detroit-based award-winning journalist who worked for The Associated Press, the Detroit Free Press and most recently as Detroit Bureau Chief for Trucks.com. He also spent two decades in domestic and international media relations and executive communications with General Motors.