Bloomberg News

Junk Defaults to Stay Below Average Into July 2013, Moody’s Says

August 07, 2012

The global default rate for speculative-grade debt will hold at least 1.7 percentage points below its historical average this year as high-yield companies withstand economic weakness in the U.S. and Europe, according to Moody’s Investors Service.

The ratings company’s trailing 12-month global speculative- grade default rate was 2.8 percent in July, down from a revised pace of 2.9 percent in June, New York-based Moody’s said in a report today. High-yield corporate defaults will end 2012 at a 3.1 percent pace, before slipping to 2.9 percent by July 2013, according to the report.

“Corporate default rates remain low and steady,” Moody’s wrote. “There remain risks to the upside that default counts will accelerate. But to date we are not seeing evidence of that.”

The global speculative-grade default rate last month compares with a pace of 1.9 percent in the year-earlier period, and a historical average as of July 10 of 4.8 percent since 1983. Three companies defaulted in July, bringing the total tally for the year to 40.

The advertising, printing and publishing industries will lead defaults in the U.S. this year, while companies in the hotel, gaming and leisure businesses are the most likely to default in Europe, Moody’s said.

U.S. speculative-grade defaults increased in July to 3.3 percent from a revised 3.2 percent rate in June. In Europe, the pace of high-yield defaults fell to 2.7 percent last month, down from a revised rate of 2.8 percent a month earlier, Moody’s said.

High-risk, high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- by Standard & Poor’s.

To contact the reporter on this story: Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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