NEW YORK--(BUSINESS WIRE)--In 2015 74 U.S. high yield defaults, totaling $48.3 billion in outstanding bonds, defaulted on their debt, according to Fitch Ratings. This is up sharply from 37 companies with $31.7 billion in outstanding bonds in 2014 and the highest levels seen since 2009.
The trailing 12-month (TTM) U.S. high yield bond default rate stood at 3.4% at end-December 2015. However, it will likely decrease at the end of this month, as Caesars' January 2015 bankruptcy filing exits the TTM default universe, even as other companies default. Arch Coal filed for bankruptcy on Jan. 11, accounting for $3.2 billion of default volume, while Verso Paper filed for bankruptcy today. In addition, Pacific Exploration & Production recently missed an interest payment.
"Many of the commodity price-induced challenges that overwhelmed the energy and metals/mining sectors last year will persist in 2016, leaving the bond market exposed to a higher-than-normal number of defaults," said Eric Rosenthal, Senior Director of Leveraged Finance.
Fitch predicts the 2016 U.S. high yield default rate will end 2016 at 4.5% and that distressed debt exchanges (DDEs) will remain a prominent source of default. The energy sector was a large executer of DDEs in 2015, accounting for 17 of the 28 completed.
High yield bond issuance dropped 12% in 2015 from the year prior. While the energy sector volume diminished 24% from last year, it still surpassed all others for a sixth straight year. However, the maturity wall remains in the distance, with only $36 billion of bonds set to mature in 2016. Only $4 billion of these bonds are rated 'CCC' or lower.
The full report, 'U.S. High Yield Default Insight: 2015 U.S. High Yield Default Rate 3.4%; Arch Headlines January Defaults,' is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Fitch U.S. High Yield Default Insight (2015 U.S. High Yield Market Default Rate 3.4%; Arch Headlines January Defaults)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876572
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.