Moody’s speculative-grade default rate finishes first quarter at 2.3%

By Caroline Salls

Pittsburgh, April 14 – Moody’s Investors Service’s trailing 12-month global speculative-grade default rate finished the first quarter at 2.3%, up from 2.1% in the fourth quarter of 2014, according to a default report released Tuesday.

Moody’s said the reading came in close to the 2.6% it forecasted one year ago.

In the United States, the speculative-grade default rate ended the first quarter at 1.9%, unchanged from the previous quarter. In Europe, the default rate increased to 2.2% from 1.8%. A year ago, the rate was 1.8% in the United States and 2.7% in Europe.

Moody’s said it now expects the global speculative-grade default rate to rise to a still low 2.6% by the end of 2015. By region, Moody’s expects the default rate to rise to 2.7% in the United States and 2.4% in Europe.

“The stress in the energy sector has been reflected in a number of Moody’s metrics,” Moody’s Albert Metz said in the release. “But other sectors remain calm and the pace of corporate defaults remains low and steady.”

“Ample liquidity, together with a recovering U.S. economy, will likely contribute to a low default rate in the near future.”

A total of 16 Moody’s-rated corporate debt issuers defaulted in the first quarter, including energy firms Quicksilver Resources Inc. and Connacher Oil and Gas Ltd.

Of the 16 defaulters, Moody’s said 10 were from the United States, three were from Europe, and the rest were from Latin America.

By dollar volume, Moody’s global speculative-grade bond default rate ended the first quarter at 2.7%, up from 1.8% in the previous quarter.

The U.S. dollar-weighted speculative-grade bond default rate closed at 3% in the first quarter, up from 1.9% in the fourth quarter of 2014. In Europe, the rate rose to 1.7% in the first quarter from 1.2% in the last quarter.

Across industries, Moody’s said it expects default rates to be highest in the metals and mining sector in the United States and the aerospace and defense sector in Europe in the next 12 months.

In the leveraged loan market, a total of eight Moody’s-rated issuers defaulted on loans in the first quarter. The ratings agency said the U.S. leveraged loan default rate rose slightly to 1% in the first quarter from 0.9% in the previous quarter.

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