Moody’s global speculative-grade default rate climbs to 4.7% in July

By Caroline Salls

Pittsburgh, Aug. 9 – Moody’s Investors Service’s trailing 12-month global speculative-grade default rate came in at 4.7% in July, up from 4.6% in June and above its long-term average of 4.2%, according to a global default report released Tuesday.

Moody’s said it expects the default rate to peak at 5.1% this November before easing off to 3.9% in July 2017.

“In the month since U.K. voters opted to leave the European Union, high-yield spreads have returned to their pre-Brexit levels in both Europe and the U.S.,” Moody’s Sharon Ou said in the release. “This helps relieve the pressure on future default rates.”

A total of 11 Moody’s-rated companies defaulted in July, sending the default tally to 102 so far this year.

The ratings agency said defaults remain concentrated in the commodities sector, with continued cash flow pressures as a result of low oil prices.

Moody’s said seven oil and gas companies defaulted last month, including the bankruptcy filings of Halcon Resources Corp. and CJ Holding Co.

Of the 62 commodities companies that have defaulted so far this year, the agency said 49 have come from the oil and gas sector and 13 from metals and mining.

By region, so far in 2016 defaults have been concentrated in North America, where 80 Moody’s-rated issuers have defaulted, compared with 10 from Europe and the remaining 12 from Asia, Latin America and Africa.

The trailing 12-month U.S. speculative-grade default rate finished July at 5.5%, up from 5.2% in June. In Europe, the comparable rate edged up to 2.6% from 2.5%.

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