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Moody’s global speculative-grade default rate slides to 3.1% in May
By Caroline Salls
Pittsburgh, June 11 – Moody’s Investors Service’s global speculative-grade default rate closed at 3.1% for the 12 months ended May 31, down from 3.2% in April, the agency said in its latest global corporate default report.
With both unemployment and high-yield spreads at low levels, Moody’s said it expects the default rate to continue to trend lower in the near future, falling to 2.1% by December and to 1.7% by May 2019.
“Our benign default forecast reflects an ongoing supportive credit environment for speculative-grade companies,” Moody’s Sharon Ou said in a news release.
“Such favorable default rate trends are driven by growing economies in most countries around the world, alongside low unemployment and narrow high-yield spreads.”
Moody’s said the U.S. speculative-grade default rate edged lower in May to 3.7% from 3.8% in April, while the European rate increased slightly to 2.5% from 2.4% over the same time frame.
The agency said it expects the U.S. rate to fall to 2.6% and the European rate to decline to 1.6% by the end of 2018.
So far this year, 43 Moody’s-rated companies have defaulted, including 10 retailers and nine oil and gas firms.
In May, seven defaults were recorded, including distressed debt exchanges by Northern Oil and Gas, Inc., Proserv US LLC and Proserv Operations Ltd.
Moody’s said defaults so far this year remain concentrated in the United States, where 31 defaults were recorded at the end of May versus just six in Europe.
By industry, Moody’s said it expects the retail sector to have the second-highest default rate in the United States in the coming 12 months, with only media: advertising, printing and publishing forecasted to have a higher rate.
In Europe, retail is likely to be the third-most troubled sector, behind consumer services and media: diversified and production, the report said.
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