Global default rate for speculative-grade firms ends 2020 at 6.7% — Moody’s

The trailing 12-month global default rate for speculative-grade financial and nonfinancial companies was 6.7% at the end of December 2020, up from 3.2% at the end of 2019, according to Moody’s.

Of the 211 defaults in 2020, 141 (or two-thirds), were in North America. Europe had 38 (18%), while the rest were in Asia-Pacific (17), Latin America (13) and Middle East & Africa (two), Moody’s said in a report published on Jan. 28.

Moody's forecasts that the rate will peak at 7.3% in March 2021, and then decline to 4.7% by December 2021. "While pandemic related risks to the economy remain present, we expect that the combination of vaccinations and policy support measures will support the economic recovery over the course of 2021, and the number of defaults this year will be lower than last year," said Moody's Vice President Sharon Ou.

Despite a decline in the number of defaults over the course of this year, the 2021 default rate will remain above the long-term average of 4.2% since 1983, reflecting the rise in the significant share of low-rated issuers in the corporate universe.