Mar. 28 2019 — The 2019 global corporate default tally rose to 27 this week following the default of Ohio-based coal producer Murray Energy Corp. This is the fourth default in the metals, mining, and steel sector over the past two weeks.
- Two of the four defaulters in the sector are U.S. coal producers (Murray Energy Corp. and Cloud Peak Energy Resources LLC). This industry continues to struggle with declining domestic demand due to competition from natural gas and renewables.
- S&P Global Ratings lowered the rating on Murray Energy Corp. to 'SD' (selective default) from 'CCC+', reflecting our view that deeply discounted open market debt repurchases by distressed issuers are tantamount to default. The issuer continues to operate amid depressed domestic coal demand with limited access to capital markets--a trend seen across the U.S. coal sector (see "Murray Energy Downgraded To 'SD' On Open Market Repurchases Below Par; Affected Debt Issues Downgraded To 'D'," March 21, 2019).
- Both Cloud Peak and Murray had issues trading at distressed levels prior to default (see "The U.S. Distress Ratio Remains Higher Than Its 2018 Average," Jan. 30, 2019).
- Bankruptcy is the leading cause of defaults this year, with nine (33%), all of which are U.S.-based Chapter 11 defaults. If this trend continues, this will be the first year since 2010 for which bankruptcy will be the leading cause of default. Distressed exchanges have led the default tally in three of the past four years (see chart 3).