Fitch: U.S. High Yield Default Volumes Nearing Milestone as DDEs Surge
More than $5.5 billion of December defaults has increased the trailing
12-month (TTM) high yield rate to 3.3% from 3% at the end of November,
according to Fitch Ratings. This marks the 13th consecutive month that
defaulted volume exceeded $1.5 billion, closing in on the 14-month run
seen in 2008-2009.
"Investors are taking note that the lower-for-longer oil price scenario
doesn't look like it's going away anytime soon," said Eric Rosenthal,
Senior Director of Leveraged Finance.
Corporate spreads for 'CCC' credits exceeded 1,600 bps on Friday for the
first time since summer 2009. Energy and metals/mining compose $84
billion of the 'CCC' rating category. Spotty capital markets access for
these companies has led to decreased issuance, and pricing suggests
distress will continue. Of 'CCC' rated energy and metals/mining
companies, 88% are bid below 80 cents.
So far this month the energy TTM default rate climbed to nearly 7%.
Vantage Drilling's chapter 11 filing and Magnum Hunter Resources and
Swift Energy's missed payments pushed the E&P TTM default rate close to
Distressed debt exchanges (DDEs) accounted for 44% of defaults on an
issuer-count basis in the past year. Energy companies have relied on
DDEs to improve their capital structure and buy time as liquidity and
cash flows are affected by low oil prices. Several companies including
SandRidge Energy, Halcon Resources, Warren Resources and Exco Resources
have completed multiple DDEs.
The full report, "U.S. High Yield Default Insight: 2016 U.S. High Yield
Default Rate Forecast at 4.5%; Energy at 11%" is available at www.fitchratings.com
Additional information is available at www.fitchratings.com
Fitch U.S. High Yield Default Insight (2016 U.S. High Yield Default Rate
Forecast at 4.5%; Energy at 11%)
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Copyright Business Wire 2015
Source: Business Wire
(December 14, 2015 - 12:41 PM EST)
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