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S&P Sees Risk of Rising 2022 Defaults as ‘Key Lifelines’ Vanish

  • Risk remains ‘abnormally high’ despite upgrades, analysts say
  • Leverage remains elevated for single B, CCC rated companies

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The rate at which companies globally fail to meet their debt obligations could pick up in 2022 if growth and deleveraging efforts stall, while “key lifelines” that have supported the weakest borrowers through the pandemic disappear, according to S&P Global Ratings.

Credit raters have been upgrading high-yield companies and slashing their default rates this year amid accommodative fiscal and monetary policies, a rebounding economy and investor appetite for risk. But risk remains “abnormally high” as government supports are withdrawn and financing conditions normalize, S&P analysts led by Nicole Serino wrote in a report Tuesday.