Moody’s global speculative-grade default rate closes September at 2.8%

By Caroline Salls

Pittsburgh, Oct. 10 – Moody’s Investors Service’s global speculative-grade default rate closed at 2.8% for the trailing 12-month period ended Sept. 30, down from 3.2% at the end of June and 4.6% a year ago, according to a global default report released Tuesday.

Moody’s said it expects the default rate to continue trending down to finish the year at 2.5%, before receding to 1.9% at the end of September 2018.

“The global speculative-grade default rate reached its lowest level in two years at the end of last month,” Moody’s Sharon Ou said in the release.

“Our continued benign outlook is supported by thin high-yield spreads, which reflect favorable fundamentals including stabilizing commodity prices, ample liquidity and a growing economy.”

Ou said the number of corporate defaults fell noticeably in the three months ended Sept. 30.

A total of 13 Moody’s-rated corporate issuers missed debt repayments in the third quarter, down from 29 the previous quarter.

The ratings agency said five, or 38%, of last quarter’s defaults occurred in the retail sector, up from 17% in the second quarter and none in the first. Conversely, Moody’s said the oil and gas sector accounted for 45% of defaults in the first quarter and 17% in the second but saw no defaults last quarter.

The global corporate default tally reached 64 at Sept. 30, the report said. The United States accounted for the majority of defaults in the third quarter, with its 10 defaults including Toys 'R' US Inc., Toys 'R' Us-Delaware Inc., Boart Longyear Management Pty Ltd. and Floworks International LLC.

In Europe, just one Moody’s-rated company defaulted last quarter.

Moody’s said it expects the U.S. speculative-grade default rate to fall to 3.1% at year-end from 3.3% currently and the European rate to fall to 1.9% at year-end from its present 2.4%.

By industry, Moody’s forecasts that in the United States the default rate will be highest in the durable consumer goods sector, followed by environmental industries and retail. In Europe, the rating agency expects the default rate to be highest in the media: advertising, printing and publishing sector, followed by oil and gas.

© 2015 Prospect News.
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