U.S. Companies at Risk of Default Near Crisis Peak, Says Moody'sby
The number of U.S. companies that have the highest risk of defaulting on their debt is nearing a peak not seen since the height of the financial crisis.
With the energy industry crumbling amid record low oil prices, the number of companies with the lowest credit ratings reached 264 as of Feb. 1, just shy of the high of 291 set in April 2009, according to a report by Moody’s Investors Service Wednesday. That’s a 44 percent jump in the past 12 months, Moody’s said.
“The majority of new additions came from oil & gas, followed by metals & mining, chemicals and coal,” Moody’s analyst Julia Chursin wrote in the report.
In the last month alone as many as 20 firms were added to the list, mostly borrowers in the energy industry like Cliffs Natural Resources Inc. and W&T Offshore Inc., according to the report. A total of 74 energy companies, including Energy XXI Gulf Coast Inc. and Halcon Resources Corp., are expected to have significant difficulties sustaining their debt, according to the report.
Of the four companies that were removed from the list during the month, three -- Arch Coal Inc., Swift Energy Co. and Verso Corp. -- were due to defaults. The fourth, Visant Corp., a marketing and publishing company in Armonk, New York, no longer had debt outstanding.
“Continuing a trend from 2015, downgrades dominated the rating actions taken regarding companies remaining on the list, and defaults remain the main reason some left the group,” Chursin wrote.
The Moody’s list is comprised of companies with ratings below B3 or that are projected to be downgraded below that level, which indicates at least a substantial risk of default.