S&P global corporate junk default rate decreases to 2.44% in December

By Caroline Salls

Pittsburgh, Feb. 8 – Standard & Poor’s global trailing-12-month speculative-grade corporate default rate decreased to 2.44% in December from 2.61% in November, according to a report released Thursday.

S&P said the U.S. speculative-grade corporate default rate contracted to 3.01% in December from 3.09% in November. The European speculative-grade default rate widened to 2.37% in December from 2.24% in November, while the emerging markets default rate narrowed to 0.96% from 1.56%.

As of Dec. 26, S&P said there were 86 global corporate defaults, excluding nine confidential issuers, in 2017, accounting for $92.9 billion in debt, and 59 of the defaulted issuers are from the U.S. region.

As of Jan. 19, S&P said there had been five global corporate defaults so far in 2018 accounting for $4.7 billion in debt. Since its latest report, the agency said six issuers have defaulted, including GNC Holdings Inc., Expro Holdings U.K. 3 Ltd., Fieldwood Energy LLC, Liberty Tire Recycling Holdco LLC, BIS Industries Ltd. and RGL Reservoir Management Inc.

S&P said it expects the U.S. trailing-12-month speculative-grade corporate default rate to decrease to 2.7% by September 2018 from 3.1% in September 2017.

Weakest links down

The agency said the global weakest links tally declined to 195 issuers as of Jan. 19, the fourth consecutive monthly decline and the lowest level in two years. The 195 global weakest links have total rated debt worth about $231 billion.

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

S&P said five weakest links were added and eight were removed from the link since Dec. 26.

Of those removed, three each resulted from defaults or selective defaults, and one each was removed after a downgrade and outlook/CreditWatch revision and an upgrade with an outlook/CreditWatch revision.

Of the five additions, two were downgraded and one each was downgraded, had an outlook/CreditWatch revision and was newly rated.

Based on the number of weakest links, S&P said the consumer products sector now displays the highest potential for defaults with 33 weakest links as of Jan. 19, followed by the oil and gas sector with 26. Media and entertainment closely follows with 25 weakest links.

Together, S&P said these three sectors account for 43.1% of weakest links.

According to the report, the U.S. region held 75% of weakest links with 147 as of Jan. 19, up from 69% a year ago.

S&P said Europe has the second-highest concentration of weakest links, with 20, or 10.3% of the total, and total debt of $18 billion.

Leveraged loans

In the leveraged loan segment, S&P said the trailing-12-month institutional loan default rate, based on the number of loans, remained at 1.72% in December, the same as in November.

The loan distress ratio, which is the percentage of loans trading below 80 cents on the dollar, took a dip in December, declining to 3.04% from 3.15% in November, S&P reported.

© 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.