Moody's: Global Spec-Grade Default Rate Almost Doubled In 2015

KUALA LUMPUR, Jan 14 (Bernama) -- The global speculative-grade default rate rose to 3.4 per cent at the end of 2015 with a total of 108 defaults, roughly double the 55 defaults in 2014, said Moody's Investors Service. It said the rate will continue to increase as volatility in the oil & gas and metals & mining sectors, along with slowing growth in China, stress the credit metrics of speculative-grade issuers. "Oil & gas companies contributed to more than 30 per cent of the defaults in the fourth quarter of 2015, with several large companies including Chesapeake Energy Corporation, California Resources Corporation and Offshore Group Investment Ltd defaulting on their debt obligations. "Overall, 35 corporate issuers defaulted, up from 24 last quarter," it said in a statement. Moody's forecasts that the global speculative-grade default rate will continue to rise to 3.9 per cent by the end of 2016, according to the December Default Report. Moody's forecasts that the rate will rise to 4.4 per cent in the US and stay near 3.0 per cent in Europe. "Metals & mining and oil & gas will likely drive the default story in 2016. "The divergence between default rates in the oil & gas and metals & mining industries, and the overall speculative-grade default rates is generally in line with the current economic conditions in these two industries," Vice President and Senior Credit Officer Sharon Ou said. Moody's also notes that in the leveraged loan market, six loan defaults were recorded in the fourth quarter, with all but one from the US. The US leveraged loan default rate ended the fourth quarter at 2.0 per cent, up from 1.6 per cent in the previous quarter. -- BERNAMA