New York, March 01, 2012 -- Despite great uncertainties surrounding the European sovereign debt crisis
in 2011, corporate defaults were surprisingly few, says Moody's
Investors Service in its twenty-fifth annual default study that
updates defaults and recovery rates for global corporate issuers.
"Only 35 Moody's-rated corporate issuers defaulted
on a total of $36 billion of debt in 2011, the lowest in
four years," said Sharon Ou, author of the report.
"This modest default number stemmed mostly from ample liquidity,
low interest rates and the recent surge of refinancing that addressed
looming maturities."
The 2011 defaults were led by the Transportation sector, accounting
for seven defaults including American Airlines. By region,
defaults remained concentrated in North America with 25 issuers default
on $26 billion of debt and the remaining 10 from Europe,
with $10 billion of debt affected.
After a more positive start to 2011, the second half of the year
saw greater turbulence in the financial markets as Greece hovered near
default and Moody's placed the United States' Aaa rating on
watch for downgrade, notes the report.
The increasing risk deriving from the European crisis is reflected in
Moody's quarterly ratings drift—which fell from -2.6%
to -5.1% in the last quarter of 2011—with credit
quality deterioration much more severe in Europe than in North America.
Quarterly ratings drift is measured by the rating upgrade rate minus the
rating downgrade rate.
Moody's global speculative-grade default rate ended 2011
at 1.8%, down from 2010's year-end level
of 3.2%. The default rate for all Moody's-rated
corporate issuers fell to 0.8% at the end of 2011 from 1.3%
at year-end 2010. Both results correspond closely with the
rating agency's one-year-ago forecasts of 1.9%
and 0.8%, respectively.
Looking ahead, Moody's default rate forecasting model predicts
a modest rise in the global default rate this year, under the baseline
macroeconomic scenario. The default rate is anticipated to rise
to 2.8% by December 2012, a level below the historical
average of 4.8%.
"The declining trend in high yield default rate, which has
lasted for over two years, has probably ended," says
Albert Metz, Managing Director of Credit Policy Research.
"The current weak macroeconomic climate, falling consumer
confidence, and deteriorating corporate credit quality are expected
to put upward pressure on the default rate," adds Metz.
In a more pessimistic scenario, which assumes that the sovereign
debt problem materialize and turn the global economy into a double dip
recession, the default rate can rise to 8.1%,
still below the 2008-2009 peak of 13.6%, says
Moody's.
For more information please see the full report "Annual Default
Study: Corporate Default and Recovery Rates, 1920-2011"
on www.moodys.com.
************
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.
Sharon Ou
Asst Vice President - Analyst
Credit Policy
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Albert Metz
MD - Credit Policy Research
Credit Policy
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: Global corporate defaults slowed down in 2011, facing upward pressure in 2012