Corp. Default Rate Reaches 9.2%
July 2, 2009
The U.S. speculative-grade corporate default rate reached 9.16% in June, a year-to-date high, according to a report issued by Standard & Poor’s today. Another 18 companies defaulted last month bringing the yearly total to 119.
The rate is up from 8.13% in May and made a large leap from the 2% default rate in June 2008. S&P expects the rate to reach a mean forecast of 14.3% by May 2010, but it could get as high as 18.5% if the economy sours more than expected.
The report also notes that spreads are still at historically high levels, despite the recent tightening. As of June 20, the speculative-grade spread was at 976 bps, up from 698 bps at the same time in 2008, according to S&P's Global Fixed Income Research. The distressed ratio as of June 30 was 36.1%, up from 13.7% in June 2008.
S&P noted that new issuance was a continued bright spot on the market. Year-to-date high yield issuance was at $52.9 billion at the end of June, up from $32.3 billion for the same period in 2008.
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