Meanwhile travel-related industries are expected to recover in 2023 with improving profit margins. "Our bleaker macroeconomic forecast for declining economic activity in 2023 will remain sluggish through 2024," the analysts wrote, "which means the profitability and cash generation of issuers that operate in more cyclical sectors will be especially hurt." (Reporting by Matt Tracy)
By Matt Tracy
Jan 31 (Reuters) - Moody's Investors Service expects the
U.S. corporate debt default rate to accelerate to nearly 6% by
year-end from 2% in 2022, it said in a report on Tuesday.
The actual rate of default could prove much higher - 17.7%
in the worst-case scenario - depending on the "severity of
fallout from rising interest rates, the Russia-Ukraine military
conflict, China's economic slowdown and pandemic concerns," the
report's authors noted.
The number of non-financial corporate defaulters doubled to
10 in the last quarter of 2022 from just five in the third
quarter, it said. A total 32 corporate families defaulted on
their debt in 2022, compared to 21 in 2021, it added.
Most defaults - nearly 70% - occurred on distressed
exchanges, wherein ailing companies replaced their existing debt
with a less burdensome debtload.
At the same time, the number of credits rated B3 negative or
lower hit 218 by year-end, its highest count since September
2021 and a sign of more defaults to come.
Sectors expected to feel the worst pinch this year include
chemicals, metals and mining, paper and forest products, and
shipping, according to Moody's.
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