Moody’s expects global junk default rate to climb to 4.2% in next year

By Caroline Salls

Pittsburgh, Feb. 11 – Moody’s Investors Service expects its trailing 12-month global speculative-grade default rate to slowly increase to 4.2% in the next year from January’s 3.4% rate, according to a report released Thursday.

“We expect the default rate to continue its upward trend due to ongoing weakness in commodity sectors and refinancing challenges that bond issuers in these industries will face,” Moody’s Sharon Ou said in the release.

“We expect significantly higher default rates in the metals and mining and oil and gas sectors in particular, especially in the [United States].”

Moody’s said commodity sectors continued to fuel defaults in January, with Arch Coal, Inc. filing for bankruptcy and Sheridan Investment Partners I LLC completing a distressed exchange.

Among U.S. speculative-grade issuers, the default rate held steady at 3.1% from December to January. In Europe, the comparable rate fell to 3.3% in January from 3.5% in December.

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