Corporate defaults remain modest, although the global speculative-grade default rate did tick up at the end of the third quarter to 3.0%, reports Moody’s Investors Service.
The rating agency says that the trailing 12-month default rate was up slightly from 2.9% in the second quarter. And, a year ago, the default rate stood at 1.8%.
There were nine defaults among Moody’s-rated corporate debt issuers in the third quarter of 2012, seven in North America and the remaining two in Europe and Latin America, it says, adding that there have been 46 defaults in total this year, compared with 17 in the first nine months of last year.
Based on its forecasting model, Moody’s expects the global speculative-grade default rate to end this year at 3.0%, before declining to 2.9% by the end of the third quarter 2013, it says. This would still be will be well below the historical average of 4.8%, it notes.
“The corporate default rate has remained low and stable for some time now, despite some very weak economic fundamentals,” notes Albert Metz, managing director of Moody’s credit policy research. “With ample liquidity available, we are not expecting that to change over the coming months.”
In the coming year, Moody’s expects default rates to be highest in the media: advertising, printing & publishing sector in the United States, and in the hotel, gaming & leisure sector in Europe.
Moody’s distressed index, which measures the percentage of high-yield issuers whose debt is trading at distressed levels, ended the third quarter at 17.0%, down from 19.5% in the previous quarter, and 24.6% in the same period last year.