Despite large looming defaults like Caesars Entertainment and recent ones such as Energy Future Holdings’, Fitch believes favorable credit conditions will continue to support a low default rate overall, the rating firm wrote in a report late last week. Defaults are going to be driven by company specific problems rather than broad macro considerations, it said.
Fitch said the US high-yield par-weighted trailing 12-month default rate ended October at 2.4 percent, its lowest level since April, when Energy Future Holdings’ bankruptcy first propelled the rate above 2 percent. “Since then, there have been 17 issuer defaults on $7.8 billion in bonds, compared with 19 and $11.5 billion over the same period in 2013.”
Fitch said there were three defaults in October totaling $1.6 billion, which included missed payments for gaming entity Mashantucket and energy concern Endeavour International. In addition, metals and mining company Hidili Industry International completed a distressed debt exchange.
This is good for the high-yield market overall, which reached $1.36 trillion at the end of October and up 8 percent on the year, Fitch said.