More US companies have defaulted on their debt this year than issuers from any other nation or region, Standard & Poor’s (S&P) analysts led by Diane Vazza wrote in a report on Thursday last week.
As of last week, 111 companies worldwide had defaulted on their obligations, the highest tally since 2009 when the the figure hit 242 for the same period. About 60 percent of this year’s global defaults have come from US borrowers, Vazza wrote, up from 55 percent last year, when 33 of 60 defaulters were American.
Firms from emerging markets were the second-largest defaulters, accounting for 23 percent of the pool, which is a smaller share than last year, S&P data showed.
VULNERABLE FIRMS
Plummeting crude oil prices and speculation about how the US Federal Reserve’s plan to tighten monetary policy would affect corporate borrowing costs have made companies more vulnerable, Vazza wrote.
“The current crop of US speculative-grade issuers appears fragile, and particularly susceptible to any sudden, or unanticipated shock,” she wrote.
Arch Coal Inc was the most recent addition to the list, having its credit rating downgraded to “speculative default” by S&P last week after the coal producer missed about US$90 million in interest payments and exercised a 30-day grace period with the holders of some of its notes.
MORE DEFAULTS
Looking ahead, S&P expects the US corporate default rate to rise to 3.3 percent by September next year from 2.5 percent the previous year. The bulk of the failures are to come from companies in the oil and gas sector, which accounted for about a quarter of this year’s defaults.
Since 1981, the average default rate for global speculative-grade companies is 4.3 percent, Vazza said.
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