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Moody's: Defaults Among US Speculative-Grade Companies Remain Low in First Quarter

Global Credit Research - 17 Apr 2013

New York, April 17, 2013 -- US corporate family defaults remained low in the first quarter of 2013, when there were eight defaults representing more than $8 billion of debt, compared with 15 defaults representing about $7 billion of debt a year earlier, Moody's Investors Service says in a new report, "Default Count Remains Low in First Quarter." Four of the first quarter's eight defaults involved more than $1 billion of debt, compared with two in the same period last year.

"Solid demand from fixed-income investors for bonds and leveraged loans, along with low interest rates, have contributed to the low default count," says Senior Vice President Lenny Ajzenman. "And we expect the US speculative-grade default rate to decline further this year, to end it at 2.6%." This would be well below the late-2009 peak above 14% and the historical average of 4.5%, he says.

Of the six bankruptcies in the first quarter, three represented more than $1 billion in defaulted debt. Dex One and SuperMedia Inc. both filed Chapter 11 petitions in March to facilitate their merger. Dex One and its subsidiaries defaulted on more than $1.9 billion of debt, while SuperMedia defaulted on more than $1.4 billion of debt. In addition, Revel Atlantic City, LLC missed an interest payment on its debt in February and filed under Chapter 11 the following month, defaulting on close to $1.8 billion of debt.

Energy Future Holdings Corp. and its subsidiary, Energy Future Intermediate Holding Company, completed the only distressed exchange during the first quarter of 2013, completing debt exchanges for more than $1.3 billion. Last year, distressed exchanges accounted for more than a third of defaults among Moody's-rated US companies.

The media and energy sectors accounted for most of the defaults in the first three months of this year, with four in media and two in energy. Among US corporate sectors, media remains the one with the highest one-year default rate forecast.

"US speculative-grade liquidity measures remain solid," Ajzenman says, "with companies taking advantage of accessible bond and loan markets to refinance pending maturities." Moody's Liquidity Stress Index, which has led changes in the default rate, is consistent with the rating agency's benign default forecast. Similarly, Moody's Refunding Indices show that refinancing risk for high-yield bonds is modest over the next three years, while its Covenant Stress Index shows that few companies are at risk of violating their bond covenants.

Moody's research subscribers can access this report at http://www.moodys.com/research/US-Corporate-Default-Monitor-First-Quarter-2013-Default-Count-Remains--PBC_152863.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Tom Marshella
MD-US and Amer Corporate Fin
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: Defaults Among US Speculative-Grade Companies Remain Low in First Quarter
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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