S&P global speculative-grade default rate slides to 2.32% in August

By Caroline Salls

Pittsburgh, Oct. 1 – Standard & Poor’s trailing 12-month global speculative-grade default declined slightly to 2.32% in August from 2.33% in July, according to a report released Thursday.

S&P said the U.S. corporate speculative-grade default rate expanded to 2.48% in August from 2.21% in July. The European speculative-grade default rate decreased to 2.05% from 2.41%, and the emerging markets default rate decreased to 2.06% from 2.3%.

Through Sept. 22, S&P said 78 issuers had defaulted so far in 2015. These defaulted issuers have outstanding debt worth $76.2 billion.

The ratings agency said six non-confidential entities have defaulted since its last report, including Black Elk Energy Offshore Operations LLC, Halcon Resources Corp., Univita Health Inc., Investtrade Bank JSC, Goodrich Petroleum Corp. and Quiksilver Inc.

Weakest links increase

S&P said the number of global weakest links increased to 167 as of Sept. 22. The 167 weakest links account for a total of $216 billion of debt.

Weakest links have either negative outlooks or ratings on CreditWatch with negative implications.

Since the most recent report, S&P said it removed seven entities from the list of weakest links and added 13.

Of the seven issuers that were removed, five are based in the United States and one each is Latin America and Europe. Of the 13 entities added this month, six are in the United States, including Bermuda and the Cayman Islands, three are in the Eastern Europe, Middle East and Africa region and two each are in the Asia Pacific and Latin America regions.

The issuers removed from the list included:

• Goodrich Petroleum and Halcon were removed because of selective defaults;

• Phoenix Cos. Inc. and Hexion Inc. were removed because their outlooks were revised to stable;

• Quiksilver was removed because it defaulted;

• Expro Holdings U.K. 3 Ltd. was removed because it was downgraded and its outlook revised to stable; and

• Central Puerto SA was removed because its rating was withdrawn.

The issuers added to the list included:

• Emeco Holdings Ltd., Millennium Health LLC, Ultrapetrol (Bahamas) Ltd., Paragon Offshore plc and Banco Fibra SA were added because they were downgraded;

• J. Crew Group Inc., Blom Bank sal, BankMed sal, Bank Audi sal and Fairway Group Holdings Corp. were added because their outlooks were revised to negative;

• Mongolian Mining Corp. and Hardware Holdings LLC were added because they were downgraded and their outlooks were revised to negative; and

• SAExploration Holdings Inc. was added because it is newly rated.

Sector vulnerability

Based on the number of weakest links, S&P said the financial institutions and oil and gas sectors are the most vulnerable to default. The financial institutions sector has the greatest number of weakest links with 26 issuers, or 15.6% of the total. The oil and gas sector was next with 23 issuers, or 13.8% of the total.

The ratings agency said U.S.-based issuers account for 56% of the 167 weakest links, partially reflecting the fact that a large proportion of issuers S&P rates are U.S.-based.

By volume, the 93 U.S.-based weakest links account for about $160 billion of debt, which is 74.3% of the $216 billion total for all weakest links.

Leveraged loans

In the leveraged loan segment, S&P said the trailing-12-month institutional loan default rate, which is based on the number of loans, widened to 0.78% in August from 0.57% in July.

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