According to Fitch Ratings, considering the defaults to date and the potential for more to come in the next three months, the trailing twelve-month (TTM) default rate could climb to nearly 2%.
American Seafoods Group completed in August a recapitalization deal at a substantial discount with a private equity firm that was essentially a default. Wilton Holdings converted about $514 million of its unrated payment-in-kind notes into preferred equity. Other filings came from NYDJ Apparel LLC, Univita Health, and Alpha Natural Resources.
Fitch noted that a health care company, Millennium Laboratories, is working out a restructuring deal on $1.8 billion in outstanding leverage loans that could lead to a future filing, and Samson Resources’ bankruptcy filing in September following a debt restructuring in August.
The ratings firm has not forgotten about either Arch Coal Inc. (NYSE: ACI) or Peabody Energy Corp. (NYSE: BTU), saying that if Millennium, Arch and Peabody file for bankruptcy this year, the leveraged loan default rate will rise to 1.9% for the year.
And Fitch is not expecting the situation in the energy sector to improve any time soon:
Fitch believes the energy and metals/mining sectors will continue to struggle. As of Thursday, September 24, 39% of energy companies’ first and second lien loans are bid below 80 cents versus 31% one month ago. That discrepancy was larger among metals/mining companies, with 42% bidding below 80 cents, up from 27% a month earlier.
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