Moody’s global speculative-grade default rate closes January at 4.6%

By Caroline Salls

Pittsburgh, Feb. 9 – Moody’s Investors Service’s global speculative-grade default rate closed at 4.6% for the trailing-12-month period ended Jan. 31, up from 4.5% in December, according to a report released Thursday.

Moody’s said it expects the global speculative-grade default rate to fall to 3% by the end of this year which, if realized, will be below its long-term average of 4.3%.

In the United States, Moody’s said the comparable rate is expected to reach 3.6% and in Europe, 2% by the end of the 2017.

“After an elevated pace of defaults in the first half of 2016 as many energy companies suffered from the slump in oil prices, defaults eased in the second half as oil prices rose,” Moody’s Sharon Ou said in the release.

“Going into 2017, we expect defaults in the energy sector to continue to abate, since many weak companies have already defaulted and remaining firms are for the most part healthier.”

The agency said there were 10 defaults among Moody’s-rated global speculative-grade issuers in the opening months of 2017.

Four of the defaulting companies were from the oil and gas sector, including Bonanza Creek Energy Inc., which filed for bankruptcy. The largest default in January was Avaya Inc., which had around $6 billion of rated debt.

Moody’s said U.S. issuers accounted for half of January’s defaults, and European firms for two.

In the leveraged loan market, Moody’s recorded six defaults in January, with four from the United States.

The issuer-weighted U.S. loan default rate finished the month at 2.7%, down slightly from 2.8% at year-end 2016.

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