S&P global corporate junk default rate increases to 1.7% in January

By Caroline Salls

Pittsburgh, Feb. 27 – Standard & Poor’s global trailing-12-month global corporate default rate widened to 1.7% in January from 1.42% in December, according to a report titled “Global Weakest Links and Default Rates: Greece’s Uncertain Future Weighs On Increased Corporate Default Risk.”

S&P said the U.S. corporate speculative-grade default rate increased to 1.76% in January from 1.59% in December, the European speculative-grade default rate expanded to 1.34% from 0.97%, and the emerging markets default rate climbed to 1.57% from 1.05%.

S&P said that 13 issuers had defaulted so far in 2015 through Feb. 17, including confidential entities. The defaulted issuers have outstanding debt worth $12.2 billion.

The ratings agency said the five non-confidential defaults recorded since its last report came from RadioShack Corp., Afren plc, Altegrity Inc., Connacher Oil & Gas Ltd. and Talon PIKco NV.

S&P noted that the number of global weakest links increased to 154 as of Feb. 17, with 15 additions and nine removals. The 154 weakest links have total rated debt worth $214 billion.

Weakest links are issuers rated B- and lower with either negative rating outlooks or ratings on CreditWatch with negative implications.

Of the nine entities removed from the weakest links list, S&P said five are from the United States, and two each are from Europe and Canada.

Meanwhile, of the 21 added, eight are from the United States, including Bermuda and the Cayman Islands, and, six are from Europe, and one is from Canada. Of the six European weakest links, five are Greek, S&P said.

Removals and additions

Those removed from the weakest links list were as follows:

• Afren was removed because of a selective default;

• Talon, RadioShack, Altegrity and Connacher were removed because they defaulted;

• Rooster Energy Ltd. was removed because its rating was withdrawn; and

• LHP Hospital Group Inc., Ruby Tuesday Inc. and Lantheus Medical Imaging Inc. were removed because their outlooks were revised to stable.

Those added to the weakest links list were as follows:

• Government Development Bank for Puerto Rico was added as a result of a downgrade;

• Project Porsche Holdings Corp., Brunswick Rail Ltd., Colt Defense LLC and Niska Gas Storage Partners LLC were added because they were downgraded and their outlooks revised to negative;

• Public Power Corp. and Aston Martin Holdings (UK) Ltd. were added because they were downgraded and their CreditWatch statuses revised to negative;

• Alta Mesa Holdings LP, Modular Space Corp., Eurobank Ergasias SA and Carrols Restaurant Group Inc. were added because their outlooks were revised to negative;

• Piraeus Bank SA, National Bank of Greece SA and Alpha Bank AE were added because their CreditWatch statuses were revised to negative; and

• LBI Media Inc. was added because it is newly rated.

Sector breakdown

Based on the number of weakest links, S&P said the financial institutions, media and entertainment and oil and gas sectors are the most vulnerable to default.

The agency said the financial institutions and media and entertainment sector have the most weakest links, with 23 each, or15% of the total, followed by the oil and gas sector at 15, or 9.7% of the total.

S&P said U.S.-based issuers account for eight of the 15 weakest links added, According to the report, this preponderance partly reflects the fact that a large proportion of issuers S&P rates are based in the United States.

In the leveraged loan segment, S&P reported that the trailing-12-month institutional loan default rate, which is based on the number of loans, increased to 0.75% in January from 0.62% in December.

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