A company's creditworthiness shows in the spread, not in the interest rate

18 October 2026, 09:36

According to the Financial Times of 17 October, Anthropic, the American artificial intelligence company, is offering Blackstone's funds a yield of more than 10 per cent on $9 billion of debt. It is a share of the subordinated portion, the one repaid after the others, of a $60 billion financing backed by the lease payments Anthropic will make over five years for its chips. Whoever is repaid last takes more risk, and asks for more.

The price of a loan is made of two parts

In loans to Italian businesses too, the lender charges for the risk it runs. The interest rate a bank applies to a company is the sum of two components.

The first is the market rate, the same for everyone on any given day. In variable-rate loans it is Euribor, the average cost at which Europe's main banks lend money to one another. In fixed-rate loans it is the IRS (Interest Rate Swap), the market benchmark for a loan of the same length: what counts is the one on the day of signing, which then holds until the last instalment.

The second is the spread, the margin the bank adds for that company and that loan. The spread covers the bank's costs and its profit, and above all the risk: how likely the bank judges it that the debt will not be repaid, and how much it would lose if that happened. It reflects the soundness of the company's accounts, the length of the loan and the security that comes with it, such as a mortgage on a property.

The same rate can hide two opposite judgements

The two components of the rate move for different reasons. The market benchmark changes with the decisions of the ECB and with the expectations of those who lend money, and it does not depend on the borrower. The spread, on the other hand, follows the company: its accounts, its payment record, the security it can offer.

That is why the rate on its own mostly tells when the contract was signed. In the autumn of 2023 money was dearer than it had been for years: on 19 October three-month Euribor reached 4 per cent, its highest level since 2008. A fixed-rate loan signed in those months still carries high interest today, even if the spread is low, that is, even if the bank thought well of the company. Conversely, a loan signed this year may cost less and carry a higher spread, if in the meantime the market has fallen and the bank's view of the company has worsened.

Creditworthiness, the reliability the bank recognises in a company, therefore shows in the spread.

The spread is worked out from the contract and from the benchmark on the day of signing

In variable-rate loans the spread is written in the contract, which states the rate as the chosen Euribor, for example the three-month one, plus a margin: that margin is the spread. In fixed-rate loans the contract usually shows only the overall rate; the spread is found by subtracting from that figure the IRS of the same length, taken on the day of signing.

With that figure for each loan, a table is built: the bank, the date of signing, the type of rate, the spread. Sorted by bank, it shows how each lender rates the company; sorted by date, it tells whether that assessment has changed over the years. To estimate what the next loan will cost, today's market benchmark is taken and the typical spread of the company's banks is added to it, giving more weight to the most recent contracts, which describe the company as it is now.

Spreads are compared, not rates

The most common mistake takes two forms. The first is judging a bank expensive because its loan has the highest rate, when it may simply be the oldest, signed with the market at its peak. The second is estimating the cost of future loans from the average of the rates in place: that average tells in which years the contracts were signed, not how much the banks will ask tomorrow.

The comparison does have a limit. Two spreads can only be compared between similar loans: as a rule, a loan secured by a mortgage costs less than an unsecured one, and a short loan less than a long one. It is the principle of the news item at the start: with the same borrower, whoever accepts a greater risk asks for a higher margin.

In a negotiation with a bank the market benchmark stays off the table, because neither side decides it. What is negotiated is the spread, the only part of the price shaped by what the company can show of its own accounts.

This article was prompted by a news item published in Financial Times on 17 October 2026.