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Fitch: Several defaults would likely push August default rate to 3%
By Caroline Salls
Pittsburgh, Aug. 13 – Fitch Ratings said several defaults would likely increase its overall trailing 12-month August default rate to 3%.
According to a Thursday news release, defaults from Alpha Natural Resources Inc., Hercules Offshore Inc., Samson Resources Corp. and Arch Coal Inc. would probably increase the rate.
The agency said U.S. energy and metals/mining defaults are likely to continue through the summer as commodity price weakness keeps those industries in the spotlight. Fitch said the corporate default outlook outside of those affected by the weak commodity price environment remains much healthier.
Fitch’s trailing 12-month U.S. energy default rate could hit 4% in August, according to the release, more than twice its 1.9% historic average.
The agency said the August metals/mining default rate, already at 10% following Alpha’s bankruptcy earlier in the month, could jump to 15% if Arch Coal elects to file after its distressed debt exchange (DDE) expires on Aug. 14.
“Despite the busy summer for defaults, the worst for energy and metals/mining has not necessarily passed,” Fitch’s Eric Rosenthal said in the release.
“An uptick in DDEs historically has not been a confidence builder for stable default rates.”
In addition to Arch, Fitch said five energy companies completed DDEs during the second quarter of 2015, including Venoco Inc., Halcon Resources Corp., SandRidge Energy Inc., Midstates Petroleum Co. and Warren Resources Inc.
At the end of July, Fitch said its overall default rate stood at 2.5%, up from 2.3% at the end of June. Excluding the energy and metals/mining sector, the July default rate is 2.3 %, stemming largely from Caesars Entertainment Operating Co., Inc.’s bankruptcy filing.
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