NEW YORK (Reuters) - Eighty-five companies worldwide defaulted on their debt in the year through November 11, impacting a total of $284 billion, up sharply from the two previous years, Standard & Poor’s said Monday.
By comparison, there were only 22 defaults for all of 2007 and 30 in 2006, the agency said in a statement.
Seventy of the 85 companies are based in the United States, five in Europe, four in Asia, three in Canada, two in Mexico and one in Russia, according to Diane Vazza, head of S&P’s fixed income group.
The United States is also the leader in the number of weakest links, which are companies rated “B-minus” or lower with a negative outlook. A “B-minus” rating in S&P’s scale is a full six notches into speculative, or “junk” status.
Seventy-five percent of the 207 weakest links worldwide are U.S. companies. The 207 companies have a combined $417.38 billion in debt with the media and entertainment, consumer products, forest products and building materials sectors accounting for most of the companies on the list.
“The number of global weakest links continues to increase sharply as eroding credit quality leads to lower ratings and more entities with negative outlooks or ratings on CreditWatch negative,” said Vazza.
The 12-month trailing global corporate speculative-grade bond default rate rose to 2.3 percent in October from 2.04 percent in September. The U.S. speculative-grade default rate increased for a 10th consecutive month to 2.86 percent in October from 2.68 percent in September.
The default rate in Europe rose to 1.01 percent from 1.00 percent, while the emerging markets default rate rose to 0.82 percent in October from 0.17 percent in September.
S&P expects the U.S. rate to rise to an average 7.6 percent in the next 12 months, meaning another 125 issuers will default on their debt.
U.S. speculative-grade bond spreads are expected to remain elevated after rising to 1,416 basis points as of November 13, from 1,383 basis points at the end of October and 561 basis points at the start of the year.
The five most recent defaults are Canada-based Masonite International Inc, a maker of interior and exterior doors that missed an October 15 interest payment on $770 million of subordinated notes; U.S.-based VeraSun Energy Corp VSUNQ.OB, an ethanol producer that filed for bankruptcy on October 31; Hawaiian Telcom Communications, which failed to make interest payments on a series of bonds on November 3; Pilgrim’s Pride PPC.N, the largest U.S. chicken producer, which was unable to pay $25.7 million interest on November 3; and American Media Operations, which missed a November 1 interest payment on its notes.
VeraSun and Pilgrim’s Pride have 30-day grace periods to meet their interest payments but S&P is expecting that they will be unable to meet future obligations.
Reporting by Ciara Linnane; Editing by Leslie Adler