If you’re looking for stocks to sell, you ought to consider companies that were highly leveraged even before the novel coronavirus put the economy into freefall.

CNN Business recently reported that $425 billion in investment-grade bonds were issued by non-financial companies through the first four months of 2020. That’s nearly twice the number of bonds issued through the same period in 2019.

Not only are companies issuing a ton of debt, but they’re also drawing down their revolving credit facilities. Refinitiv says that more than 50 companies have drawn at least $1 billion from their credit lines to have enough cash to survive the pandemic recession.

“If a company is borrowing just to survive through the pandemic, that borrowing could in the future impact their ability to invest in other things,” said Will Caiger-Smith, associate editor of research firm Debtwire. “It’ll be a headwind to the recovery. They won’t just answer to their shareholders or employees, they’ll have to answer to their lenders.”

• AT&T (NYSE:T)
• Anheuser-Busch Inbev (NYSE:BUD)
• Gap (NYSE:GPS)
• Ford (NYSE:F)
• General Electric (NYSE:GE)
• Newell Brands (NASDAQ:NWL)
• Sysco (NYSE:SYY)
• Harley-Davidson (NYSE:HOG)
• Williams Companies (NYSE:WMB)
• Norwegian Cruise Line Holdings (NYSE:NCLH)

By no means is this meant to be an extensive list of companies making a bad situation worse. However, if risk isn’t your thing, here are 10 stocks to sell who debt situation will keep you up at night.

Stocks to Sell: AT&T (T)

AT&T made Global Finance’s recent list of the world’s most indebted companies, the 2020 edition.

On April 7, AT&T announced that it had added a $5.5 billion term loan to its balance sheet to fortify the telecom against the ravages of Covid-19. In addition to the $5.5 billion, it added $4 billion from a preferred share issue in February. It also has 100% of a $15 billion revolving credit facility to draw upon and $12 billion in cash on its balance sheet. 

While it might have access to $37 billion in cash, its debt loan remains one of the highest in the world. For every dollar of debt, it has just $1.20 in revenue. 

Should the economic downturn carry on into 2021, AT&T could be in a tight spot, something that wouldn’t have been the case had it not acquired Time Warner.

Anheuser-Busch Inbev (BUD)

The brewer of Budweiser is one of the businesses controlled by 3G Capital, the Brazilian private equity firm known for buying large companies, leveraging them to the hilt, and then cutting like crazy to generate the cash flow necessary to repay your loans. 

“3G-run firms owe at least $150bn (3G’s founders hold direct stakes in some firms while others are held by 3G’s investment funds; for simplicity, it makes sense to lump them together and call them 3G),” The Economist reported in March 2019. 

Warren Buffett knows all too well what can happen when you partner with these guys: you lose a lot of money. I’d go so far as to call them the finance world’s version of pirates. 

In mid-April, CFO magazine reminded its readers that Anheuser-Busch Inbev drew down its entire $8 billion revolving line of credit. That’s on top of the $102 billion in long-term debt it already had on the balance sheet.

For every dollar of debt, the company pulls just 54 cents in revenue. My guess is Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) won’t be buying BUD stock anytime soon.

Gap (GPS)

The retail industry is currently experiencing what best can be described as “Apocalypse 2,” the successor to the industry’s first apocalypse, which was the closing of thousands of stores over the past decade. Gap was brutally hurt by that first apocalypse, and the current one doesn’t look to be any kinder.

On April 20, Bloomberg reported that the company was in discussions to issue new bonds backed by some of its assets, including real estate. On April 23, Gap issued a press release announcing that it had priced $2.25 billion in senior secured notes maturing between 2023 and 2027, paying rates of interest between 8.375% and 8.875%. 

This comes after Gap drew down its entire $500 million credit facility in March. Back in February, Gap had $1.7 billion in cash on hand. By the end of April, it expects that to be as low as $750 million, resulting in a billion-dollar cash burn over three months. 

If you add the $2.25 billion in new debt to the $1.25 billion it already had as of Feb. 1, then include operating leases liabilities, which amount to $7.9 billion, we’re talking about $11.4 billion in future debt obligations. 

In fiscal 2019, Gap had sales of $16.4 billion. That means for every dollar of debt the company has $1.44 in revenue. But don’t let that fool you. The company’s current Altman Z-Score is 1.97, which means it could become distressed should business continue to deteriorate.

Ford (F)

One of Detroit’s Big Three, Ford has been hurting for some time. 

In September, Moody’s lowered its credit rating to “Ba1,” putting it outside investment-grade debt. Standard and Poor’s also downgraded it to “BBB-.” Another downgrade from either of these rating agencies and Ford will be hamstrung when it comes to finding additional financing.

In March, desperate for cash, Ford drew down $15.4 billion from its two revolving credit lines. To make matters worse, it suspended the dividend, something CFO Bob Shanks said in 2018 wouldn’t happen.

Well, it did. Now Ford shares trade at $5, their lowest level since 2009. 

According to Global Finance, Ford has $101 billion in long-term debt and $156 billion in revenue, which translates to one dollar of debt for every $1.54 in sales.  

The last time I wrote about Ford was before the company cut its dividend and drew down its credit lines. At the time, I thought a patient investor might take a gamble.

Now that it’s added so much debt, I’m not nearly as confident about Ford’s future. And that’s too bad.

General Electric (GE)

It’s hard to believe, but according to Global Finance, General Electric was the most valuable company on the planet in 2000. Today, it has a market capitalization of $59 billion and its turnaround is struggling to gain traction. 

On April 29, GE announced its quarterly earnings. Thanks to the ongoing coronavirus pandemic, they were a complete disaster. The company utilized $2.2 billion in free cash flow during the quarter as engine orders dried up for its aviation division.  

“The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March,” CEO Larry Culp, who was hired to execute a turnaround, said in its earnings release.

“We are targeting more than $2 billion in operational cost out and $3 billion of cash preservation to mitigate the financial impact, and we executed a series of actions to de-risk and de-lever our balance sheet amid a challenging environment.”

At the end of March, GE had $47.3 billion in cash on its balance sheet. However, it also had $85.2 billion in total debt for net debt of $37.9 billion. Based on $95.2 billion in sales in fiscal 2019, GE has one dollar of debt for every $1.12 in revenue.

Newell Brands (NWL)

The company behind such well-known brands as Rubbermaid, Sharpie, Elmer’s, Yankee Candles and many others reported first-quarter earnings on May 1. The company beat earnings estimates by four cents, reporting adjusted earnings per share of nine cents. However, it missed on sales, generating first-quarter sales of $1.89 billion, $10 million shy of the estimate. 

Newell Brands CEO Ravi Saligram reported that the company is seeing pockets of strength during the economic slowdown. He does expect the second quarter to be challenging but feels the company has enough liquidity to navigate the Covid-19 crisis. 

In mid-April, Fitch downgraded Newell’s Long-Term Issuer Default Rating to “BB” from “BB+.” That puts it in junk territory. Fitch believes that, despite the company’s divestiture program over the past three years, the company is overleveraged, with debt-to-EBITDA approaching 5x in 2020. If the downturn lasts longer than expected, that leverage situation could get even worse. 

Further, sales declined by almost 2% in 2019 and the company expects them to drop by high single digits in 2020 and by 7% in 2021 (from 2019 levels). 

Newell finished the first quarter with $476 million in cash and $1.2 billion in borrowing capacity from its revolving credit facility. However, it also has $6 billion in total debt, more than the company’s current market cap.

Newell’s business is going to hurt for the remainder of 2020. There is no upside.

Sysco (SYY)

When most people think of industries getting pummeled by the coronavirus, the restaurant and hospitality industry is one of the first to come to mind. Food distributors such as Sysco are getting hit hard — estimates suggest sales are down as much as 70% industry-wide — forcing them to reconfigure supply chains to sell to grocery stores. 

Due to the slowdown in sales, Sysco’s been forced to permanently terminate some employees while furloughing others at its head office in Houston.   

In addition to the staff cuts, Sysco suspended share repurchases at the end of March, cut back on capital expenditures and drew upon $1.6 billion of its $2 billion revolving credit facility.

At the same time, it sold $4 billion worth of bonds at interest rates between 5.65% and 6.6%. Earlier in the year, Sysco sold $1 billion in bonds at rates between 2.4% and 3.3%. 

In the span of six weeks, the cost of borrowing more than doubled. That’s a hefty price to pay for fortifying its business. There is a good chance that its debt will fall to junk if core business continues to deteriorate. 

At the end of December, Sysco had total debt of $8.9 billion. Add the amounts from February and March, and total debt is up to $15.5 billion. Given how badly it’s been hit by the coronavirus, shareholders better pray this slowdown doesn’t last very long. 

This is not a business I would want to own right now.

Harley-Davidson (HOG)

Since 2000, Harley-Davidson has traded at $21 on just two occasions: early 2009, and today. Given all of the press about how the iconic motorcycle company is on its last legs, that’s actually quite impressive. 

The company reported first-quarter results on April 28. 

Since nobody is buying vehicles of any description at the moment, it’s not surprising to see that revenue on motorcycle sales fell by 8% and earnings dropped 48% to 51 cents, seven cents below the consensus estimate. Up until mid-March, the company’s U.S. retail sales were up 6.6%. In the last two weeks of the quarter, sales dropped so significantly, U.S. retail sales finished down 15.5% for the quarter. 

That’s a 22% swing in just two weeks. No wonder the company cut its dividend by 95% to just two cents a share. 

Harley’s U.S. sales have been hurting in recent years. They’ve dropped 12% in the last three years alone.The international picture isn’t much better, given the company has been hammered by European and Chinese tariffs on its bikes.

In the first quarter, Harley paid out $59 million in dividends. Slashing the payout will save approximately $56 million per quarter. Like many companies, it’s also cutting back capital spending and the like, which will save a further $250 million in cash. The company says it has $2.5 billion in liquidity to ride out the coronavirus. 

The downside is that Harley finished the first quarter (March 29 quarter-end) with $8.1 billion in total debt. That’s two-and-half times the current market cap.

Any more bad news and HOG stock will be in the low teens in the blink of an eye.

Williams Companies (WMB)

In mid-March during the market meltdown, Williams Companies stock hit a 52-week low of $8.41, the lowest it’s traded since the Great Recession. 

Natural gas prices right now have risen off March lows, but still remain at levels we haven’t seen for a very long time. While pipelines are somewhat insulated from lower prices because they own the conduit for getting the product to market rather than the product per se, the slowdown in demand means less need for shipping natural gas. 

At this point in time, I’m not sure why investors would want to own any stock related to the energy industry, but that’s what makes the markets so interesting. Everyone thinks they know better. 

Morningstar’s Stephen Ellis recently discussed the midstream industry’s liquidity problems. Here’s what he had to say about Williams.

“Williams will need to proactively address its $3 billion in near-term maturities, even considering its $4.9 billion in liquidity, given its nearly $800 million in expected cash burn over the same time frame,” Ellis wrote April 17. 

At the end of December, Williams had $22.5 billion in long-term debt. The interest on that debt over the course of time is $13.4 billion. The $3 billion in notes Ellis mentioned come due in 2020 ($2.1 billion) and 2021 ($871 million).

Williams generated free cash flow of $1.5 billion in 2019. It paid $1.9 billion in dividends in 2019. If its cash flow gets much worse, it will definitely have to cut or suspend its dividend in order to meet near-term responsibilities.

To me, that makes it a sell.

Norwegian Cruise Line Holdings (NCLH)

Given the fact that I’ve recommended aggressive investors consider both Royal Caribbean (NYSE:RCL) and Carnival Cruises (NYSE:CCL) in the month of April, you might surmise that I’m also “all aboard” Norwegian Cruise Line Holdings’ stock. 

Unfortunately, that’s not the case. Call it a hunch, but I think one of the big three is going to suffer more than the others, and to me, that’s NCLH.

InvestorPlace contributor Todd Shriber recently discussed Norwegian’s woes. He concluded, with an assist from Stifel analyst Steven Wieczynski,  that it won’t go broke. But that’s only if cruises get back to normal by October. If not, it’s sunk.

“While this might be a harsh analysis, we believe the mass hysteria around COVID-19 could impact cruise demand for an extended period,” Shriber quoted Wieczynski’s note to clients. “Under this dire situation, NCLH would have a funding shortfall (after six months of no operations) but the shortfall wouldn’t be overly material (~$0.5B) and we believe NCLH could arrange additional financing through their export credit agreements or other arrangements.”

Look, no one should be buying cruise stocks right now if they can’t afford to lose their entire investment. That’s why I’ve been emphasizing RCL and CCL stocks are only for aggressive investors. Risk-averse investors ought to turn and run.

For all three stocks, I believe they could retest mid-March lows sometime in the summer, should the restart date appear to be later in 2020 or even into 2021. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.