Moody’s global speculative-grade default rate slides to 3.1% in July

By Caroline Salls

Pittsburgh, Aug. 9 – Moody’s Investors Service’s global speculative-grade default rate closed at 3.1% for the trailing 12-month period ended July 31, down slightly from 3.2% in June and 4.8% a year ago, Moody’s said in a monthly default report released Wednesday.

Moody’s said it expects the default rate to continue to decline to finish the year at 2.7%, before easing further to 2.2% by July 2018.

“Lower numbers of defaults in the commodity sectors are driving the decline in the spec-grade default rate,” Moody’s Sharon Ou said in the release.

“And looking forward, our benign outlook is supported by narrow high-yield spreads, favorable economic conditions and sufficient liquidity.”

Ou also said stabilizing commodity prices are more than offsetting growing stress in the retail sector.

The trailing 12-month U.S. speculative-grade default rate finished July at 3.6%, down from 3.8% in June, while in Europe the comparable rate rose to 2.8% from 2.7%.

Moody’s said it expects default rates to decline further during the remainder of 2017 in both the United States and Europe, with the former declining to 3.2% from 3.6%, and the latter to 2.2% from 2.8%.

Six Moody’s-rated corporate debt issuers defaulted in July, for a count of 57 so far this year.

Ou said July’s defaulters included True Religion Apparel Inc.’s Chapter 11 reorganization and Chinos Intermediate Holdings A Inc.’s distressed exchange.

By industry, the ratings agency said it forecasts that in both the United States and Europe, the default rate for the media, advertising, printing and publishing sector will be the highest in the coming year, at 6.8% and 3.7%, respectively.

Meanwhile, Moody’s said the default rate for the retail sector will reach 4.3%, the second highest in the United States, while in Europe it is expected to clock in at 1.9%.

According to the report, defaults remain concentrated in North America, where 39 companies have defaulted since January, followed by Europe, with 14 defaults.

© 2015 Prospect News.
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