Fitch: U.S. high-yield default rate to 2.7% in April; forecast stands

By Caroline Salls

Pittsburgh, April 12 – Fitch Ratings reported Thursday that previously expected defaults that occurred this month propelled its trailing-12-month U.S. high-yield default rate to 2.7% in April, marking its highest level in a year.

“The April spike is expected to be temporary because few material defaults are anticipated going forward,” Fitch’s Eric Rosenthal said in the report. “After plateauing, defaults are expected to dip in the fourth quarter compared to the activity last year.

“The 2018 high-yield default rate is still forecasted at 2%.”

Fitch said Nine West Holdings, Inc.’s bankruptcy, along with an expected distressed debt exchange for Guitar Center, Inc., lifts the April trailing-12-month retail default rate to 13% from 10.6% at the end of March.

The agency said high-yield energy defaults are expected to be minimal for the remainder of 2018, with the sector rate finishing the year at 2%.

The first quarter saw $17.4 billion in defaults compared to $5.8 billion for the same period of 2017, Fitch reported.

After a quiet first two months, Fitch said defaults amassed $14.2 billion in March, driven by two large issuers and producing the highest amount since April 2014.

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