S&P reports declining weakest links count, hitting 203 as of July 24

By Caroline Salls

Pittsburgh, Aug. 23 – Standard & Poor’s reported that its weakest links count fell to 203 as of July 24 from 216 at June 20 and a peak of 254 issuers in October 2016, according to a report released Wednesday.

S&P said the newest count marks the lowest total since 195 in December 2015.

“The July decline was led by financial institutions, with six removals, five of which were Eastern European or Asia-Pacific banks,” the release said.

S&P said the financial institutions sector makes up 14.3% of weakest links with 29 and is led by the U.S. and the Eastern Europe, Middle East, and Africa (EEMEA) regions with 12 each.

As of July 24, S&P said the oil and gas sector had the highest number of weakest links, with 40, followed by consumer products and financial institutions with 29 each. Together, the oil and gas, consumer products and financial institutions sectors account for nearly half of the total number of weakest links.

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

The 203 global weakest links have total rated debt worth approximately $249 billion, according to the report.

Since its last report, the ratings agency said it added nine issuers to the list of weakest links and removed 22.

Of those removed, 12 had an outlook or CreditWatch change, four were upgraded with an outlook or CreditWatch change, two each defaulted and had their ratings withdrawn and one each selectively defaulted and was downgraded with an outlook or CreditWatch change.

Of those added, three each were downgraded and downgraded with an outlook or CreditWatch change, two had an outlook or CreditWatch change and one was newly rated.

Rates update

In addition, S&P said the global corporate trailing-12-month speculative-grade default rate dropped for the sixth month in a row in June, to 3.05%.

S&P said the U.S. corporate speculative-grade default rate widened in June, reaching 3.79% from 3.63% in May.

The European speculative-grade default rate fell to 2.12% in June from 2.28% in May. The emerging markets default rate decreased most, to 2.17% from 2.42%.

Default details

As of July 24, S&P said there were 56 global corporate defaults, excluding five confidential issuers, so far in 2017, accounting for $41.5 billion in debt.

Since the last report, the ratings agency said five publicly rated issuers defaulted and three issuers, Rooster Energy Ltd., CST Industries Inc., and A.M. Castle & Co., were added after S&P’s monthly reconciliation process.

The five others that defaulted since the last report were Mood Media Corp., True Religion Apparel Inc., J. Crew Group Inc., Armstrong Energy Inc. and Norske Skogindustrier ASA.

In the leveraged loan segment, S&P said the trailing-12-month institutional loan default rate, which is based on the number of loans, remained stable at 1.17% in June.

The loan distress ratio, defined as the percentage of loans trading below 80 cents on the dollar, fell to 3.34% in June from 3.72% in May, the report said.

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