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The ratings agency reports that the MPL industry might reckon with a potential spike in defaults as borrowers are rolled out of two- and three-month COVID-19 hardship programs.
In the U.S., the 12-month trailing default rate fell to 3.4% in June from 4% in March, while in Europe it declined to 2.2% from 2.8% over the quarter. Globally, defaults stood at 2.9%, down from 3.4% in the first quarter.
Nearly four in five expect spreads to widen this summer, which is not good news for spec-grade U.S. companies that binged on borrowing levels over the last two years.
The number of junk-rated companies downgraded fell to 19 in July, comparedwith an average of 30 for the trailing 12 months. The upgrade count also fell 10, down from 19 in June.
