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S&P: European corporate defaults drop in 2018 despite geopolitical risks

The number of European corporate defaults fell in 2018 from the prior year, signaling improved credit quality and generally favorable lending conditions despite heightened geopolitical tensions, S&P Global Ratings said in a report published Dec. 12.

In 2018, 13 European corporates defaulted with $22.3 billion in outstanding debt, compared to 16 companies with $12 billion of debt that defaulted in 2017. The brings the annual European corporate default rate to 0.8% in 2018, down from 1% in the prior year.

"Through it all, European corporates had improved credit quality, supported by relatively strong economic growth, and lending conditions were generally favorable throughout most of the year," the rating agency said.

The consumer/service sector recorded the highest number of defaults, accounting for 31% of the the overall tally, followed by financial institutions at 23%. Fifty-four percent of European defaults were from the U.K. and associated tax havens on the back of Brexit-related uncertainties.

Meanwhile, the speculative-grade default rate dropped to 1.9% in 2018 from 2.4% in 2017.

S&P added that the global default tally was 82 in 2018, down from 95 in 2017, despite increased geopolitical and financial market stress.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.