S&P global speculative-grade default rate increases to 2.33% in July

By Caroline Salls

Pittsburgh, Sept. 4 – Standard & Poor’s trailing 12-month global speculative-grade default rate grew to 2.33% in July after rising to 2.21% in June, according to a report released Friday.

S&P said the U.S. corporate speculative-grade default rate expanded to 2.21% in July from 2.02% in June. The European speculative-grade default rate also rose to 2.41% from 2.32%, and the emerging markets default rate remained stable at 2.3%.

Through Aug. 27, S&P said 72 issuers had defaulted so far in 2015. These defaulted issuers have outstanding debt worth $71.5 billion.

The ratings agency said five non-confidential entities have defaulted since its last report, including ASG Consolidated LLC, SandRidge Energy Inc., Samson Resources Corp., Wilton Holdings Inc. and SAExploration Holdings, Inc.

Weakest links increase

S&P said the number of global weakest links increased to 161 as of Aug. 27. The 161 weakest links account for a total of $222 billion of debt.

Weakest links have either negative outlooks or ratings on CreditWatch with negative implications.

Since the most recent report, S&P said it removed two entities from the list of weakest links and added six.

Both of the entities that were removed are based in the United States. Of the six entities added this month, three are in the United States, including Bermuda and the Cayman Islands, two are in Europe, and one is in Canada.

S&P said ASG Consolidated was removed from the list because of a selective default, and Samson was removed from the list because it defaulted.

Of those added, Cooper Gay Swett & Crawford Ltd., Noranda Aluminum Holding Corp. and Tembec Inc. were added because their outlooks were revised to negative; Penn Virginia Corp. and Seitel Inc. were added because they were downgraded and their outlooks revised to negative; and Lion/Gem Luxembourg 3 Sarl was added because its CreditWatch status was revised to negative.

Sector vulnerability

Based on the number of weakest links, S&P said the oil and gas and financial institutions sectors are the most vulnerable to default. The oil and gas sector has the greatest number of weakest links with 24 issuers, or 14.9% of the total. The financial institutions sector was next with 22 issuers, or 13.7% of the total.

The ratings agency said U.S.-based issuers account for 57% of the 161 weakest links, partially reflecting the fact that a large proportion of issuers S&P rates are U.S.-based.

By volume, the 92 U.S.-based weakest links account for about $164.8 billion of debt, which is 74.1% of the $222 billion total for all weakest links.

Leveraged loans

In the leveraged loan segment, S&P said the trailing-12-month institutional loan default rate, which is based on the number of loans, narrowed to 0.57% in July from 0.81% in June.

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