S&P: US oil and gas firm tips global corporate defaults to the highest rate at this time of year since 2009

 
Francesca Washtell
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Oil and gas explorers have struggled in the commodities rout (Source: Getty)

The number of companies worldwide that have defaulted reached 146 this week, the highest level at this point in the year since the financial crisis was raging in 2009.

A US-based oil and gas company tipped the corporate default scale, Standard & Poor's said today, continuing the trend in energy-firm defaults the credit ratings agency noted earlier this year.

The default count has already surpassed the total number recorded in 2015, when the full-year tally was 113, and is 46 per cent higher than at this point last year.

The last time the total number of corporate defaults was this high in mid-November was seven years ago, when it reached 251.

Read more: S&P: Energy firms drive corporate defaults to highest since post-crisis

US companies led the pack with 96, or two-thirds, of global defaults so far, followed by 27 from emerging economies, 12 from Europe and 11 from other developed nations such as Australia, Canada and Japan.

Around a third of issuers defaulted because of miss payments, 18 due to distressed exchanges, 18 because of bankruptcy filings and other companies' moves were triggered by issues such as debt exchange, deferred interest payments and debt acceleration.

Diane Vazza, head of S&P's global fixed income research, said: "The energy and natural resources sector leads with the most defaults so far in 2016 with 78, or 53 per cent, of the 146 defaults worldwide.

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"As of 30 September, the global speculative-grade default rate for the energy and natural resources sector rose to 18.96 per cent – the biggest month-to-month increase in energy and natural resource defaults since May 2016 – driven by an increase in energy and natural resource defaults with seven of the 13 defaults, 54 per cent."

The ongoing commodities rout has hit oil, gas and other natural resources firms hard in the last couple of years, as low oil and metals prices have hit firms' margins and hampered new project developments.

Deutsche Bank and Moody's have both predicted rising levels of corporate defaults will increase in the next couple of years. Three key indicators which have historically predicted a rise in the number of defaults - debt levels, tightening monetary policy combined with flatter yield curves, and the possibility of an external shock - are all flashing red, according to Deutsche Bank.

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