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Moody’s May global junk default rate 4.5%, exceeding long-term average
By Caroline Salls
Pittsburgh, June 9 – Moody’s Investors Service’s trailing 12-month global speculative-grade default rate closed at 4.5% in May, surpassing its long-term average of 4.2% for the first time since August 2010, according to a report released Thursday.
Moody’s said it expects the rate to finish 2016 at 4.9%. Upward default rate pressure is expected to ease off after that.
“We expect the global speculative-grade default rate to rise over the next six months on the back of continued stress in the commodity sectors due to low oil prices,” Moody’s Sharon Ou said in the release.
“The default rate may moderate next year, however, given that credit market conditions have recently eased, with high-yield spreads tightening and new issuance picking up.”
In the United States, the speculative-grade default rate is forecast to climb to 6.4% by the end of this year, while in Europe it is projected to fall to 1.9% during that time, Ou said in the release. Default rates in the United States for the metals and mining and oil and gas industries are forecast to reach 10.6% and 9.2%, respectively, in the coming year, while in Europe, the default rate is expected to be highest for the media: advertising, printing and publishing industry, followed by oil and gas.
In May, 19 Moody’s-rated companies defaulted, with more than half of them from commodities sectors, including nine in oil and gas and two in metals and mining.
The agency said May defaults were again concentrated in the United States, where 14 companies defaulted, including Linn Energy LLC, SandRidge Energy Inc. and Breitburn Energy Partners LP.
The U.S. speculative-grade default rate rose to 5% in May from 4.6% in April, the highest rate since August 2010.
In Europe, Moody’s said the default rate edged up to 2.7% from 2.5% as a result of a default by New World Resources NV.
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