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Speculative-Grade Defaults In Nonfinancials Headed Higher: S&P
Consumer-sensitive sectors such as consumer products, media and entertainment, and retail and restaurants will be among the worst hit.
September 29, 2008
Standard & Poor’s warned last week that the three-year US cumulative default rate between 2008 and 2010 among speculative-grade nonfinancials could rise to 23.2%, the worst on record since 1981.
If realized, this estimate suggests that 353 speculative-grade rated nonfinancial firms could default between 2008 and 2010, with potentially more than 200 of these defaults materializing in the second half of 2009 and in 2010, according to the rating agency.
Consumer-sensitive sectors such as consumer products, media and entertainment, and retail and restaurants will be among the worst hit, in line with what happened in 1990-1992, according to S&P.
"Screaming daily headlines about impending disaster and unprecedented change in the financial sector might give some the misleading impression that nonfinancials are mercifully out of the line of fire. Nothing could be further from the truth," S&P analysts warned in their report. "As the financial landscape adapts to changes unseen since the Great Depression of the 1930s, the heat will eventually spread among nonfinancials and add significantly to cumulative default pressure on a much bigger scale than has materialized to date."
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