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According to latest data from Standard & Poor rating agency, global corporate defaults have reached 70, so far this year, fastest pace of rise since 2009, aftermath of great recession. Data is of May 18th, 2016. After 2009, YTD corporate defaults have never reached above 40, whereas this year it is closing in on last year’s total defaults of 113.
There has been 10 defaults alone in last week, whereas 8 has been from energy and segment. Around 80% of those defaulted are from United States, while half of them are from energy and other natural resources segment, which has been hit hard by price drop in oil and natural gas, along with other global commodities. So far, 29 defaults have occurred in energy segment, 12 from metals, mining and Steel.
With commodities’ operators have fewer options to boost cash flows, other than continuing operations, they remain extremely vulnerable to price fluctuations to the downside and according to Standard & Poor, more defaults are likely to follow.
However, the agency as of now sees little evidence of spillover effects into other segments of the economy, but not ruling the possibility in coming quarters.
