In financial markets, a company that generates just enough revenue to continue operating and service its debt obligations but lacks the profitability to grow, invest, or pay down principal. Zombie companies survive primarily because of low interest rates that keep their debt servicing costs manageable, and they become vulnerable when rates rise. The term is also used in cryptocurrency to describe blockchain projects that are technically still active but have negligible development activity, minimal trading volume, or effectively abandoned communities.
Example
“Rising interest rates exposed several zombie companies that had survived on cheap refinancing, with three high-profile defaults occurring in the sector within a single quarter.”