Moody's global junk default rate holds steady at 12.7% in November

By Caroline Salls

Pittsburgh, Dec. 7 - Moody's Investors Service's trailing 12 month global speculative-grade default rate finished at 12.7% in November, unchanged from October's level, according to Moody's monthly default report.

Moody's said this is the first month since December 2007 in which the default rate did not increase from the previous month's level. A year ago, the global default rate stood at only 3.2%.

The ratings agency said it now predicts that the global speculative-grade default rate will finish the year at 12.2% and then decline sharply to 3.9% by November 2010.

"The pace of defaults has fallen off significantly during the past several months as speculative-grade issuers are increasingly able to access the capital markets and refinance debt," Moody's Kenneth Emery said in the report.

"With even a modest economic recovery in 2010, the default rate is poised for a large decline from its currently elevated level."

Similarly, the U.S. speculative-grade default rate remained at 13.7% for the 12 months ended in November, the same as in October, while in Europe, the default rate among speculative-grade issuers rose to 10.1% in November from 9.4% in October.

In all, a total of eight Moody's-rated corporate debt issuers defaulted in November, which increased the year-to-date default count to 250.

Moody's said the number of defaults so far this year has already surpassed the annual count for any year in history. Last year, only 80 defaults were recorded from January through November.

Measured on a dollar volume basis, the global speculative-grade bond default rate closed at 18.8% in November, up slightly from October's level of 18.6%.

In the United States, the dollar-weighted speculative-grade bond default rate remained unchanged at 20.0% in November.

Measured on a dollar volume basis, the European speculative-grade bond default rate surged to 9.5% in November 2009 from 8.1% in October.

For U.S. speculative-grade issuers, Moody's said it predicts that the default rates will reach 13.1% next month and then fall to 4.3% a year from now.

Meanwhile, the European speculative-grade default rate is expected to peak at 10.2% next month and then fall to 3.3% a year from now.

Overall, Moody's said default rates are expected to be highest in the consumer transportation sector in the United States and the business service sector in Europe.

Across regions, five of November's defaults were by North American issuers. The remaining defaulters were from Europe and Asia.

Moody's speculative-grade corporate distress index, which measures the percentage of rated issuers that have debt trading at distressed levels, fell to 19.7% in November from 22.6% October.

In the leveraged loan market, four Moody's-rated loan issuers defaulted in November, all based in the United States. The trailing 12 month U.S. leveraged loan default rate increased to 11.6% in November from 11.1% in October.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.