Fitch: September U. S. High Yield Defaults Reaccelerate
However, the slower rate of defaults was temporary. In September, $3.8 billion of defaults have already been announced, led primarily by energy companies.
"If crude oil prices remain in or rise above the mid-high $40 range, the energy default rate could end 2016 at the lower end of our expectations, at closer to 16%," says Eric Rosenthal, Senior Director of Leveraged Finance.
Fitch forecasts the sector default rate will end 2016 between 16%-18%. The August energy TTM default rate finished at 15.8% while the E&P TTM subsector was 31.5%.
In August, distressed debt exchanges (DDEs) remained a fixture in the high yield energy space. EXCO Resources completed its third in less than 10 months. DDEs now account for nearly half (44%) of all year-to-date defaults on an issuer basis. W&T Offshore and Comstock Resources' DDEs in September ensure the trend will continue. The market has seen at least one DDE each month since February.
Energy and metals/mining continue to weigh on post-default prices, dragging August's 30-day post-default price to 25%, or 32% if you exclude them from the sample.
New issuance was robust in August, tallying $17.6 billion - a strong figure for a typically quiet month. September issuance is expected to build upon last month's results and surpass the $19.9 billion level recorded at this time last year. In addition, average secondary bids are up by 90 bps over the past month, while the amount of high yield bond outstandings bid below 70 are down.