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07 December 2023

Defaults 'to peak in November'

By Staff Writer

The global speculative-grade bond defaults will rise to peak in November this year due to deteriorating global economic before declining early next year, international ratings agency Moody's Investors Service said.

"Rapidly deteriorating global economic conditions and the ongoing banking crisis signal a flood of corporate defaulters in 2009. Moody's now forecasts that roughly 300 rated corporate issuers will default this year, compared with 104 issuers in 2008 and only 18 in 2007," said Kenneth Emery, Director of Corporate Default Research at Moody's.

The global speculative-grade default rate came in at 4.8 per cent in January, up from a revised level of 4.1 per cent at the end of 2008, says Moody's Investors Service. A year ago, the global spec-grade default rate was much lower at 1.1 per cent.

The ratings agency's default rate forecasting model now predicts that the global default rate will rise sharply for most of 2009, reaching a peak of 16.4 per cent in November and then falling slightly to 15.5 per cent by January 2010.

Measured on a dollar volume basis, the global speculative-grade bond default rate opened at six per cent in January, up from a revised level of 5.8 per cent in December. At this time last year, the global dollar-weighted bond default rate was 0.9 per cent.

Between the US and European speculative-grade issuers, Moody's default rate forecasting model predicts that they will peak at 16.4 per cent and 19.6 per cent in the final quarter, respectively.

The US speculative-grade default rate reached 5.2 per cent in January, also up from a revised level of 4.5 per cent at the end of 2008. In January 2008, the US default rate stood at 1.4 per cent.