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The Global Corporate Default Tally Steadies at 117, with no Defaults this Week

The global corporate default tally remained at 117 issuers so far in 2016 after no further issuers defaulted this week. The default tally is, however, still 54% higher than the count at this time in 2015 and has surpassed the total number of defaults recorded in the entire year 2015--113 defaults. The last time the global tally was higher at this point in the year was in 2009, when it reached 216 during the financial crisis. Two-thirds of the total defaults in 2016 are from the U.S., consistent with the elevated U.S. speculative-grade default rate of 4.7% as of July 31, 2016. This is due, in part, to the large number of U.S. issuers that we rate.

By sector, energy and natural resources has the highest concentration of defaults with 66 issuers, or 56%, of the 117 defaults worldwide. This sector is strongly dominated by U.S.-based issuers with 77%, or 50, defaults. As of July 31, 2016, the global speculative-grade default rate for the energy and natural resources sector was 17.2%--more than seven times higher than the default rate of all other sectors (see chart 1).

 

Of the defaulting issuers so far in 2016, 78 are based in the U.S., 21 in emerging markets, and nine each in the other developed nations (Australia, Canada, Japan, and New Zealand) and Europe. In 2015, 76 issuers defaulted during this period; 45 were based in the U.S., 15 in emerging markets, 12 in Europe, and four in the other developed countries.

Global Corporate Default Summary
Region Trailing-12-month speculative-grade default rate (%) 2016 year-to-date 2015 year-to-date Full-year 2015 Weakest links
U.S. 4.7 78 45 66 172
Emerging market 3.5 21 15 26 30
Europe 1.6 9 12 16 31
Other developed 5.5 9 4 5 12
Global 3.9 117 76 113 245
Other trailing-12-month default rates from July 31, 2015 - July 31, 2016. Data as of Aug. 31, 2016. Other developed region includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially rated issuers. Sources: S&P Global Fixed Income Research and Standard & Poor's CreditPro®.

Of the 117 defaulters so far in 2016, 43 issuers defaulted because of missed principal and/or interest payments, 31 due to distressed exchanges, 14 upon bankruptcy filings, 11 were confidential, six because of de facto restructuring, five due to debt exchange, two due to deferred interest payments, and one each defaulted because of debt acceleration, distressed restructuring, judicial reorganization, regulatory intervention, and a debt moratorium. Of the 113 defaulters in 2015, 36 defaulted because of distressed exchanges, 33 due to missed interest or principal payments, 22 after bankruptcy filings, 11 due to regulatory intervention, seven were confidential, one was due to judicial reorganization, one reflected a judicial recovery, one due to administration appointment, and one after completing a de facto debt-for-equity swap.

The U.S. distress ratio fell to 14.9% in July--the fifth consecutive monthly decline since July 2015 (13.2%). The drop was precipitated by commodities as the distressed issue count dropped by 40 (300 as of June 15 compared with 260 as of July 18), with the metals, mining, and steel and oil and gas sectors accounting for nearly half (17 issues) of the decrease. But by sector, oil and gas and metals, mining, and steel still have the highest distress ratios, at 31.2% and 29.5%, respectively (see "Distressed Debt Monitor: Commodities Push Down The Distress Ratio For The Fifth Consecutive Month," Aug. 3, 2016).

Global weakest links reached a historical high of 245 in June. The count was last higher in November 2009 when it reached 251. (Weakest links are issuers we rate 'B-' or lower with either negative rating outlooks or ratings on CreditWatch with negative implications.) Historically, the financial institutions sector has generally accounted for most of the weakest links, but the oil and gas sector has taken the lead this year with 59 companies versus 33 for financial institutions. This is not surprising given the recent long spell of low commodity prices (see "Global Weakest Links And Default Rates--Oil And Gas Push Weakest Links To A Historical High," July 14, 2016).

S&P Global Ratings expects the 12-month default rate for speculative-grade European financial and nonfinancial corporate issuers that we rate to rise to 1.8% by June 30, 2017, marginally up from 1.6% in 2015. This forecast is well below the average default rate of 3.4% seen between January 2002 and June 2016. Loose monetary policy across Europe--including the European Central Bank's (ECB) quantitative easing program--has helped keep down corporate funding costs and default rates. But the prolonged downturn in commodities prices and ongoing bouts of market volatility pose potential threats to continued credit stability. While most indicators of economic conditions and credit performance remain relatively benign, some are turning more negative, suggesting that the recent low-default environment may not be sustained much longer (see "The European Corporate Speculative-Grade Default Rate Could Rise To 1.8% By Mid-2017,"Aug. 16, 2016).

S&P Global Ratings expects the 12-month default rate for speculative-grade European financial and nonfinancial corporate issuers that we rate to rise to 1.8% by June 30, 2017, marginally up from 1.6% in 2015. This forecast is well below the average default rate of 3.4% seen between January 2002 and June 2016. Loose monetary policy across Europe--including the European Central Bank's (ECB) quantitative easing program--has helped keep down corporate funding costs and default rates. But the prolonged downturn in commodities prices and ongoing bouts of market volatility pose potential threats to continued credit stability. While most indicators of economic conditions and credit performance remain relatively benign, some are turning more negative, suggesting that the recent low-default environment may not be sustained much longer (see "The European Corporate Speculative-Grade Default Rate Could Rise To 1.8% By Mid-2017,"Aug. 16, 2016).

S&P Global Fixed Income Research expects the U.S. corporate trailing-12-month speculative-grade default rate to rise to 5.6% by June 2017 from 4.3% in June 2016 and 2.0% in June 2015. Stress due to continued declines in oil prices will likely remain a driver of defaults, slightly offset, though, by the increased likelihood of the Federal Reserve delaying any interest rate hikes in the coming quarters. This should help keep borrowing costs subdued for most corporate borrowers in the U.S. as investors' search for yield guides them toward speculative-grade bonds. Additional stress in Europe following the June 23 Brexit vote will likely also have a modestly positive impact on U.S. borrowers since they may be seen as less risky than their European peers. This benefit may be limited to secondary markets, however--yields on new issuance have seen less of a decline since the vote (see "The U.S. Corporate Speculative-Grade Default Rate Is Expected To Rise To 5.6% By June 2017," Aug. 18, 2016).

Global Corporate Defaults In 2016
Date Parent company Country Subsector To From Reason
1/6/2016

RCS Capital Corp.

U.S. Brokerage D CCC Missed principal and interest payments
1/12/2016 Confidential U.S. Oil and gas D B- Distressed exchange
1/13/2016 Confidential U.S. Utility D NR Chapter 11
1/18/2016

Ultrapetrol (Bahamas) Ltd.

Bahamas Transportation D CC Missed interest payment
1/20/2016

Pacific Exploration and Production Corp.

Canada Oil and gas D CC Missed interest payment
1/20/2016

Horsehead Holding Corp.

U.S. Metals, mining, and steel SD CCC Missed interest payment
1/20/2016

Slap Shot Holdings Corp. and Subsidiaries (d/b/a Sports Authority)

U.S. Consumer products D B- Missed interest payment
1/22/2016

Verso Paper Holdings LLC

U.S. Forest products and building materials D CCC- Missed interest payment
1/29/2016

Murray Energy Corp.

U.S. Metals, mining, and steel SD B Distressed exchange
2/1/2016

CB Intercommerz Ltd.

Russia Bank R C Regulatory intervention
2/2/2016

Constellation Enterprises LLC

U.S. Capital goods SD CCC- Distressed exchange
2/2/2016

SFX Entertainment Inc.

U.S. Media/entertainment D CC Chapter 11
2/2/2016

Sheridan Investment Partners I LLC

U.S. Bank SD CCC De facto restructuring
2/2/2016

Sheridan Investment Partners II L.P.

U.S. Bank SD CCC De facto restructuring
2/4/2016

Comstock Resources Inc.

U.S. Oil and gas SD B- Distressed exchange
2/8/2016

Noranda Aluminum Holding Corp.

U.S. Metals, mining, and steel D CCC+ Chapter 11
2/9/2016

A.M. Castle & Co.

U.S. Metals, mining, and steel SD CC Debt exchange
2/12/2016

Paragon Offshore PLC

U.S. Oil and gas D CC Chapter 11
2/16/2016

Energy XXI Ltd.

Bermuda Oil and gas D CCC+ Missed interest payment
2/17/2016

Denver Parent Corp.

U.S. Oil and gas D CCC+ Missed interest payment
2/18/2016

PetroQuest Energy Inc.

U.S. Oil and gas SD CC Debt exchange
3/2/2016

Chaparral Energy Inc.

U.S. Oil and gas D CCC- Missed interest payment
3/8/2016

Prospect Holding Co. LLC

U.S. Finance Co. SD CC Distressed exchange
3/8/2016

Town Sports International Holdings Inc.

U.S. Media/entertainment SD B- Distressed exchange
3/10/2016

Aspect Software Inc.

U.S. High technology D CCC- Chapter 11
3/15/2016

Linn Energy LLC

U.S. Oil and gas D CCC Missed interest payment
3/17/2016

Foresight Energy L.P.

U.S. Metals, mining, and steel D CCC- Missed interest payment
3/17/2016

Nuverra Environmental Solutions Inc.

U.S. Oil and gas SD CCC- Debt exchange
3/18/2016

Peabody Energy Corp.

U.S. Metals, mining, and steel D CCC+ Missed interest payment
3/22/2016

UCI Holdings Ltd.

U.S. Automotive SD CCC Missed interest payment
3/22/2016

Usinas Siderurgicas de Minas Gerais S.A. (Usiminas)

Brazil Metals, mining, and steel SD CCC+ Missed principal payment
3/23/2016

Templar Energy LLC

U.S. Oil and gas SD CCC- Missed interest payment
3/23/2016

American Media Inc. (American Media Operations Inc.)

U.S. Media/entertainment SD CCC+ Distressed exchange
3/24/2016

Mongolian Mining Corp.

Mongolia Metals, mining, and steel D CCC- Missed amortization payment
3/24/2016

PDG Realty S.A. Empreendimentos E Participacoes

Brazil Homebuilders/real estate companies SD CCC- Missed debt payment
3/24/2016 Confidential Confidential Confidential D NR Confidential
3/28/2016

Southcross Holdings Borrower L.P.

U.S. Utilities D CC Chapter 11
4/1/2016

SquareTwo Financial Corp.

U.S. Finance companies D CCC Missed interest payment
4/4/2016

Midstates Petroleum Co. Inc.

U.S. Oil and gas D CCC- Missed interest payment
4/4/2016

Ultra Petroleum Corp.

U.S. Oil and gas D CC Deferred interest payment
4/4/2016

Rex Energy Corp.

U.S. Oil and gas SD CC Distressed exchange
4/8/2016

UkrLandFarming PLC

Ukraine Consumer products SD CC Missed principal payment
4/11/2016

Government Development Bank for Puerto Rico

U.S. Bank SD CC Regulatory intervention (moratorium)
4/12/2016

Vertellus Specialties Inc.

U.S. Chemicals, packaging, and environmental services D CCC Missed principal payment
4/12/2016

Cliffs Natural Resources Inc.

U.S. Metals, mining, and steel SD CC Distressed exchange
4/13/2016

Norske Skogindustrier ASA

Norway Forest products and building materials SD CC Debt exchange
4/18/2016

Logan's Roadhouse Inc.

U.S. Retail/restaurants D CCC- Missed interest payment
4/19/2016

Edcon Holdings Ltd.

South Africa Retail/restaurants SD CCC+ Missed interest payment
4/19/2016

CHC Group Ltd.

U.K. Oil and gas D CCC Missed interest payment
4/20/2016

Penn Virginia Corp.

U.S. Oil and gas D CCC Missed interest payment
4/20/2016

Odebrecht Oleo e Gas S.A. (Odebrecht S.A.)

Brazil Oil and gas D CC Missed interest payment
4/22/2016

Community Choice Financial Inc.

U.S. Finance companies B- SD De facto restructuring
4/22/2016

Trident Resources Corp.

Canada Oil and gas CCC- D Missed interest payment
4/28/2016

White Star Petroleum LLC

U.S. Oil and gas SD CCC Distressed exchange
4/29/2016

Perpetual Energy Inc.

Canada Oil and gas SD CC Distressed exchange
4/29/2016

ION Geophysical Corp.

U.S. Oil and gas SD CC Distressed exchange
5/3/2016

Fairway Group Holdings Corp.

U.S. Retail/restaurants D CCC- Chapter 11
5/5/2016

Fairmount Santrol Inc.

U.S. Metals, mining, and steel SD CCC+ De facto restructurings
5/5/2016

RGL Reservoir Management Inc.

Canada Oil and gas SD CCC+ Distressed exchange
5/6/2016

Claire's Stores Inc.

U.S. Retail/restaurants SD CCC Distressed exchange
5/9/2016

Atlas Iron Ltd.

Australia Metals, mining, and steel SD CC Debt exchange
5/10/2016

USJ Açúcar e Álcool S/A

Brazil Consumer products SD CC Missed interest payment
5/12/2016

Denbury Resources Inc.

U.S. Oil and gas SD CC Distressed exchange
5/12/2016

Intelsat S.A.

Luxembourg Telecommunications SD CCC Distressed exchange
5/12/2016 Confidential Confidential Confidential D NR Confidential
5/13/2016

Chesapeake Energy Corp. (A)

U.S. Oil and gas SD CCC Distressed exchange
5/13/2016

Permian Resources LLC

U.S. Oil and gas SD CCC+ Distressed exchange
5/16/2016

SandRidge Energy Inc.

U.S. Oil and gas D CCC- Chapter 11
5/16/2016

Breitburn Energy Partners

U.S. Oil and gas D CC Chapter 11
5/17/2016

Stone Energy Corp.

U.S. Oil and gas D CCC- Missed interest payment
5/18/2016

Constellation Enterprises LLC

U.S. Capital goods D CCC- Chapter 11
5/18/2016

Seventy Seven Energy Inc.

U.S. Oil and gas D CC Missed interest payment
5/18/2016

Tervita Corp.

Canada Oil and gas D B- Missed interest payment
5/23/2016

Arendal S. de R.L. de C.V.

Mexico Homebuilders/real estate companies D CC Missed principal payment
5/25/2016

Camposol S.A. (Camposol Holding PLC)

Peru Consumer products SD CC Distressed exchange
5/26/2016

New World Resources N.V.

U.K. Metals, mining, and steel D CCC- Debt acceleration
5/27/2016

Gymboree Corp. (The)

U.S. Retail/restaurants SD CC Distressed exchange
5/29/2016

Linc USA GP

U.S. Oil and gas D NR Chapter 11
5/31/2016

Rolta India Ltd.

India High technology SD CCC- Missed interest payment
6/6/2016

Bill Barrett Corp.

U.S. Oil and gas SD B- Distressed exchange
6/6/2016

Hercules Offshore Inc.

U.S. Oil and gas D CC Chapter 11
6/7/2016

Far-Eastern Shipping Co. PLC

Russia Transportation SD CC Missed interest payment
6/9/2016

Chesapeake Energy Corp. (B)

U.S. Oil and gas SD CCC Distressed exchange
6/10/2016

Cenveo Inc.

U.S. Media and entertainment SD CC Distressed exchange
6/13/2016

Fieldwood Energy LLC

U.S. Oil and gas SD CC Distressed exchange
6/14/2016

Harvest Operations Corp. (Republic of Korea)

Canada Oil and gas SD CC Distressed exchange
6/15/2016

Barminco Holdings Pty Ltd.

Australia Capital goods SD B- De facto restructuring
6/17/2016

Maxus Energy Corp.

U.S. Oil and gas D NR Chapter 11
6/16/2016

Lightstream Resources Ltd.

Canada Oil and gas D CCC- Missed interest payment
6/21/2016

Oi S.A.

Brazil Telecommunications D CCC- Judicial reorganization
6/22/2016

Consolidated Minerals Ltd.

Jersey Metals, mining, and steel SD CC Distressed restructuring
6/26/2016

Hammons (John Q.) Hotels L.P.

U.S. Media and entertainment D NR Chapter 11
6/29/2016 Confidential Confidential Confidential SD CCC+ Confidential
7/1/2016

Triangle USA Petroleum Corp.

U.S. Oil and gas D CCC Chapter 11
7/1/2016

C&J Energy Services Ltd.

Bermuda Oil and gas D CCC- Missed interest payment
7/4/2016

Gol Linhas Aereas Inteligentes S.A.

Brazil Transportation SD CCC Distressed exchange
7/5/2016

MD America Energy LLC

U.S. Oil and gas SD CCC Distressed exchange
7/6/2016

FTS International Inc.

U.S. Oil and gas SD CC Distressed exchange
7/7/2016

Goodman Networks Inc.

U.S. Telecommunications SD CCC+ Missed interest payment
7/7/2016 Confidential Confidential Confidential D CCC- Confidential
7/15/2016

Transtar Holding Co.

U.S. Automotive D CCC+ Missed interest payment
7/18/2016

Atlas Resource Partners L.P.

U.S. Oil and gas D CCC- Deferred interest payment
7/19/2016

Forbes Energy Services Ltd.

U.S. Oil and gas D CCC- Missed interest payment
7/19/2016 Confidential Confidential Confidential SD CC Confidential
7/27/2016 Confidential Confidential Confidential R CCC+ Confidential
8/1/2016

Usina Caete S.A. - NE

Brazil Consumer products D CCC- Missed principal and interest payments
8/3/2016

PTC Group Holdings Corp.

U.S. Metals, mining, and steel SD CCC Missed interest payment
8/4/2016 Confidential Confidential Confidential D CCC- Confidential
8/5/2016

CNG Holdings Inc.

U.S. Finance companies SD B- De facto restructurings
8/9/2016

LTR Holdco Inc.

U.S. Oil and gas D CCC+ Missed interest payment
8/11/2016

Vanguard Natural Resources LLC

U.S. Oil and gas SD CC Distressed exchange
8/12/2016 Confidential Confidential Confidential SD CC Confidential
8/18/2016

Bonanza Creek Energy Inc.

U.S. Oil and gas D CCC Missed interest payment
8/18/2016

Sterling Mid-Holdings Ltd.

Jersey Finance companies SD CC Distressed exchange
8/23/2016

Sidewinder Drilling Inc.

U.S. Oil and gas SD CC Distressed exchange
8/24/2016

California Resources Corp.

U.S. Oil and gas SD CC Distressed exchange
NR--Not rated. SD--Selective default. Data as of Aug. 31, 2016. Sources: S&P Global Fixed Income Research and Standard & Poor's CreditPro®.