Corporate defaults “nearing financial crisis levels”

The number of corporate defaults has reached the ‘milestone’ of 100 so far this year, a figure not seen since the aftermath of the financial crisis in 2009. According to ratings agency Standard & Poor’s (S&P), the current number of defaults is 50% higher than the same time last year. Diane Vazza, head of fixed income research at the firm, said: “The last time the global tally was higher at this point in the year was in 2009 when it reached 177 during the financial crisis.” Of the 100 defaults that have taken place this year, the majority have occurred in the US (67). Historically, financial institutions have generally accounted for most of the distressed companies – but in 2016 the oil and gas sector took the lead with 55 companies versus 29 for financial institutions. Vazza said this was “not surprising given the extended period of stress on commodities”. S&P is not optimistic for the future of the energy sector. It states that stress in the form of persistently low prices for oil and other commodities, the potential for more rate hikes by the Federal Reserve, and financial market volatility abroad will likely produce more defaults in the next 12 months. S&P said there is potential for “overspill” from the energy industry into other sectors. This is bad news for investors in US high yield, as the energy sector makes up a substantial percentage of the US high yield index, at about 12%. Although the European high yield market is not as impacted by its exposure the energy sector, S&P warned that sharply falling commodities prices, slowing global growth, and significant market volatility all pose potential threats to ongoing credit stability. ©2016 funds europe

Sponsored Profiles

SPONSORED FEATURE: Investing for income

May 17, 2017

Portfolio Manager Thomas Kruse examines the findings from Pioneer Investments’ survey on income investing and outlines ways of achieving a target income.

SPONSORED ARTICLE: A radical solution to KYC concerns

May 17, 2017

The 1MDB affair shows that lax know-your-customer and due-diligence procedures are a major risk, says Paolo Brignardello, head of product management and marketing, Fundsquare. New solutions are...

SPONSORED FEATURE: AIFMD - What does Brexit mean?

Apr 18, 2017

An open discussion between funds industry experts and initiated by SGG Luxembourg took place in London to examine  the implications of Brexit for UK fund managers marketing to the EU.

SPONSORED FEATURE: Luxembourg fund reporting – CRS vs FATCA

Apr 18, 2017

Luxembourg funds need clear procedures for CRS compliance, writes Andrew Knight, Partner at M Partners, a member of the Maitland network of law firms.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.



May 17, 2017

With such an intangible product, it can be hard for asset managers to communicate what they do. Having personality and connecting with customer aspirations may be the key, our branding roundtable hears.

ROUNDTABLE: The issue is perception

Mar 21, 2017

Our panel discuss tax transparency, the elegance of private placement and why Jersey could do more to promote itself. Chaired by Tom Cowsill in Saint Helier.