S&P global speculative-grade default rate jumps to 2.61% in November

By Caroline Salls

Pittsburgh, Dec. 24 – Standard & Poor’s trailing 12-month global speculative-grade default increased to 2.61% in November from 2.46% in October, according to a report released Thursday.

S&P said the U.S. corporate speculative-grade default rate increased substantially to 2.77% in November from 2.71% in October. The European speculative-grade default rate inched up to 1.66% from 1.65%, and the emerging markets default rate increased significantly to 2.81% from 2.44%.

Through Dec. 14, S&P said 105 issuers had defaulted so far in 2015. These defaulted issuers have outstanding debt worth $98.13 billion.

The ratings agency said six non-confidential entities have defaulted since its last report, including Bank Uralsib (PJSC), China Fishery Group Ltd., Swift Energy Co., PrivatBank, Tonon Bioenergia SA and Getty Images Inc.

Weakest links increase

S&P said the number of global weakest links increased to 195 as of Dec. 14, the highest number since 203 recorded in March 2010. The 195 weakest links account for a total of $234 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 nine entities from the list of weakest links and added 17.

Of the nine issuers removed, five are in the United States, including Bermuda and the Cayman Islands, two are in Asia Pacific and one each is in Europe and Eastern Europe and Middle East Africa (EEMEA). Of the 17 issuers added this month, 11 are in the United States, four are in Europe, and one each is in Canada and EEMEA.

The issuers removed from the list included:

• Isola USA Corp. was removed because its rating was withdrawn;

• China Fishery, Getty and Bank Uralsib were removed because of selective defaults;

• Swift Energy was removed because it defaulted;

• Cambium Learning Group Inc. and Sound Global Ltd. were removed, because their ratings were upgraded and their outlooks revised to stable;

• Sorenson Communications Inc. was removed, because its outlook was revised to positive; and

• Solway Investment Group Ltd. was removed, because it was upgraded and its CreditWatch Status was revised to positive.

The issuers added to the list included:

• Del Monte Foods Inc., Optima Specialty Steel Inc., Grupo Isolux Corsan SA, Development Capital Bank OJSC and Sprint Industrial Holdings LLC were added because their outlooks were downgraded;

• Postmedia Network Inc., Abengoa SA, Cenveo Inc., Stallion Oilfield Holdings Inc., Nine West Holdings Inc., EnergySolutions Inc., Wise Metals Intermediate Holdings LLC, Cognor SA, Neovia Logistics Intermediate Holdings LP and Bon-Ton Stores Inc. were added, because they were downgraded and their outlooks revised to negative;

• SNAI SpA was added, because its outlook was revised to negative; and

• MMM Holdings Inc. was added because it was newly rated.

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 accounts for the greatest number of weakest links with 34 issuers, or 17.4%, of the total, followed closely by the financial institutions sector with 33 issuers, or 16.9% of the total.

The ratings agency said U.S.-based issuers account for 56% of the 195 weakest links, partially reflecting the fact that a large proportion of issuers’ S&P rates are U.S.-based.

By volume, the 110 U.S.-based weakest links account for about $164 billion of debt, which is 70% of the $234 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, increased to 1.09% in November from 0.88% in October.

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