Advertisement
Advertisement

U.S. corporate default rate to rise in 2023 -Moody’s

By:
Reuters
Published: Jan 31, 2023, 20:07 UTC

By Matt Tracy (Reuters) - Moody's Investors Service expects the U.S. corporate debt default rate to accelerate to nearly 6% by year-end from 2% in 2022, it said in a report on Tuesday.

U.S. corporate default rate to rise in 2023 -Moody’s

By Matt Tracy

(Reuters) – Moody’s Investors Service expects the U.S. corporate debt default rate to accelerate to nearly 6% by year-end from 2% in 2022, it said in a report on Tuesday.

The actual rate of default could prove much higher – 17.7% in the worst-case scenario – depending on the “severity of fallout from rising interest rates, the Russia-Ukraine military conflict, China’s economic slowdown and pandemic concerns,” the report’s authors noted.

The number of non-financial corporate defaulters doubled to 10 in the last quarter of 2022 from just five in the third quarter, it said. A total 32 corporate families defaulted on their debt in 2022, compared to 21 in 2021, it added.

Most defaults – nearly 70% – occurred on distressed exchanges, wherein ailing companies replaced their existing debt with a less burdensome debtload.

At the same time, the number of credits rated B3 negative or lower hit 218 by year-end, its highest count since September 2021 and a sign of more defaults to come.

Sectors expected to feel the worst pinch this year include chemicals, metals and mining, paper and forest products, and shipping, according to Moody’s.

Meanwhile travel-related industries are expected to recover in 2023 with improving profit margins.

“Our bleaker macroeconomic forecast for declining economic activity in 2023 will remain sluggish through 2024,” the analysts wrote, “which means the profitability and cash generation of issuers that operate in more cyclical sectors will be especially hurt.”

(Reporting by Matt Tracy)

About the Author

Reuterscontributor

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV. Learn more about Thomson Reuters products:

Did you find this article useful?

Advertisement