Moody’s global speculative-grade default rate up to 4.7% in October

By Caroline Salls

Pittsburgh, Nov. 9 – Moody’s Investors Service’s global speculative-grade default rate closed at 4.7% for the trailing 12-month period ended Oct. 31, up from 4.5% in September, according to a report released Wednesday.

Moody’s said commodity sectors continue to see the most defaults, accounting for four of the eight defaults among Moody’s-rated companies last month.

“Some 60% of the 124 defaults seen so far this year have occurred in the commodities sectors,” Moody’s Sharon Ou said in the release.

“North American companies accounted for 96 of these and European firms for 12, with the remainder occurring in Latin America, Asia Pacific and Africa and including the Venezuelan oil and gas concern, Petroleos de Venezuela SA.”

Moody’s said the U.S. speculative-grade default rate finished October at 5.6%, up from 5.4% in September and double the rate of 2.8% for the same period of 2015.

In Europe, the rate fell to 2.3% in October against 2.4% last month and 2.6% a year ago.

The ratings agency said it expects the global speculative-grade default rate to come in at 4.3% at the end of 2016 before trending even lower, to 3.3% by the end of October 2017.

“Factors driving our benign default outlook include an issuer-friendly market that has allowed companies to refinance as necessary, mitigating the risk of debt nonpayment,” Ou said.

“In addition, default risk is expected to decline in the commodity sectors in 2017, with weaker companies having been weeded out and those that survive being relatively healthier.”

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