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Research Announcement:

Moody's - US speculative-grade default tally changed minimally between first and second quarters of 2019

31 July 2019

New York, July 31, 2019 --

- The default rate closed June at 3.0% and is forecast to come in at 2.9% a year from now

- Credit risk would rise if the economy were to deteriorate or the US-China trade war were to worsen

The trailing 12-month default rate for US speculative-grade, non-financial companies crept to 3.0% in the second quarter of 2019 from 2.6% in the first, Moody's Investors Service says in its Q2 2019 corporate default monitor. The default rate trend is expected to remain fairly steady and low over the next 12 months, supported by a robust economy and stable corporate earnings growth, with the credit markets largely open to speculative-grade issuers.

"Sixteen companies defaulted during the second quarter of 2019, against 17 the prior quarter, while the amount of defaulted debt fell by around 40% to $19 billion from $32 billion," said Moody's analyst Julia Chursin. "Also noteworthy during the past quarter is that defaulters were concentrated in the energy and services sectors, and half of all defaults involved private equity."

The oil and gas industry continues to harbor pockets of stress, Chursin says. Some highly leveraged companies were not able to improve their earnings and liquidity following the 2015-2016 commodity downturn.

Moody's US speculative-grade indicators continue to hang largely in neutral territory, though the Liquidity Stress Indicator has been trending steadily higher, signaling that liquidity conditions have become less robust. The indicators don't suggest an impending spike in defaults, but credit risk would rise if the US economy were to deteriorate, the US-China trade war to worsen, spreads widened and investors became more risk-averse.

Subscribers can access the report,"US Corporate Default Monitor — Second Quarter 2019: Defaults tick lower, while forecast remains relatively flat over the next year," at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186293

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.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Julia Chursin
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Tom Marshella
MD-US and Amer Corporate Fin
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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