Stress in oil sector causes us corporate default rate to climb

S&P Global Fixed Income Research expects the US corporate trailing-12-month speculative-grade default rate to increase to 5.6% by June 2017, from 4.3% in June 2016 and 2% in June 2015.

Continued stress from the sustained decline in oil prices will likely remain a driver of defaults, though offsetting that slightly is the increased likelihood of the Federal Reserve delaying any interest rate hikes in the coming quarters. This should help keep borrowing costs subdued for most corporate borrowers in the United States as investors’ search for yield guides them toward speculative-grade bonds, says S&P.

Additional stress in Europe following the June 23 Brexit vote will likely also have a modestly positive impact on US borrowers, as they may be seen as less risky than their European peers.

However, this benefit may be limited to secondary markets – yields on new issuance have seen less of a decline since the vote.

Under a best-case scenario, S&P forecasts the default rate will remain at 4.3% through June 2017. In their worst-case scenario, S&P expects the default rate will rise to 7.1%.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


The Time is Right for Optimum Reliability: Capital-Intensive Industries and Asset Performance Management

Imagine a plant that is no longer at risk of a random shutdown. Imagine not worrying about losing...

Going Digital: The New Normal in Oil & Gas

In this whitepaper you will learn how Keystone Engineering, ONGC, and Saipem are using software t...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...

Leveraging the Power of Information in the Energy Industry

Information Governance is about more than compliance. It’s about using your information to drive ...