Moody’s global speculative-grade default rate down to 3.6% in April

By Caroline Salls

Pittsburgh, May 9 – Moody’s Investors Service’s global speculative-grade default rate closed at 3.6% for the trailing 12-month period ended April 30, down from 3.9% in March, according to a global default report released Tuesday.

Moody’s said it expects the default rate to continue to recede this year and beyond, falling to 2.6% in December and 2.4% at the end of April next year.

“Despite geopolitical uncertainties in Europe, high-yield spreads tightened last month both in Europe and the U.S., supporting our benign default outlook,” Moody’s Sharon Ou said in the release.

“Nevertheless, while steady economic growth and a stabilizing commodity sector are expected to help stem defaults, rising headwinds in the U.S. retail sector will likely result in a significant rate of default for rated retail issuers over the next 12 months.”

According to Ou, about 14% of Moody’s-rated retail universe is in distress, the highest level since 2009.

Among the seven rated issuers defaulting last month, Moody’s said Payless Inc. filed Chapter 11 bankruptcy, the first rated retail default of 2017, underscoring the challenging environment facing brick-and-mortar retailers.

Nevertheless, the ratings agency said commodities companies remain the primary contributor to defaults so far this year, accounting for 11 of the 29 defaults, including GulfMark Offshore, Inc.’s April default.

Moody’s said defaults on both bonds and loans were down in April.

By dollar volume, Moody’s said the global speculative-grade bond default rate declined to 2.4% in April from 2.7% in March.

Meanwhile, in the leveraged loan market, Moody’s recorded two defaults in April, both in the United States. The issuer-weighted U.S. loan default rate eased to 2.0% last month, from 2.1% in March, the ratings agency said.

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