The global speculative-grade default rate ticked up in the second quarter, reports Moody’s Investors Service.
The rating agency says that its trailing 12-month global speculative-grade default rate finished the second quarter at 2.8%, up from 2.5% in the first quarter, although this is down from 3.1% in the same period last year.
Of the 19 defaults among Moody’s-rated corporate debt issuers in the second quarter, 11 were from North America and four came from Europe, with the rest in Latin America, the firm reports. For the year to date, there have been 40 defaults, which is the same as the first half of 2012.
Based on its forecasting model, Moody’s expects the speculative default rate to rise to 3.2% by the end of this year, before falling to 2.7% by the end of the second quarter next year. “Defaults remain stable, but are expected to increase slightly,” notes Albert Metz, managing director of Moody’s credit policy research. “Easy liquidity has of course kept the default rate low for some time. If funding becomes tighter we would expect an increase in the incidence of default.”
Across industries, Moody’s continues to expect default rates to be highest in the media: advertising, printing & publishing sector in the U.S., and the hotel, gaming & leisure sector in Europe in the year ahead.
Moody’s distressed index, which measures the percentage of high-yield issuers whose debt is trading at distressed levels, rose to 9.1% by the end of the second quarter, compared with 8.8% in the first quarter. Yet, at the same time last year, the index was much higher at 19.5%.