Approximately forty percent of American businesses who failed to pay their debts in 2023 had already failed, per a recent analysis by credit rating company Moody's.
According to the report, which was published on Tuesday, these and other heavily indebted businesses suffered within an environment of rising interest rates and inflation.
The majority of these companies were acquired by leveraged buyout firms, according to the research. The majority of defaults under private equity ownership were distressed exchanges, in which debtors collaborated with lenders and investors to reorganise their obligations.
However, Moody's also discovered that the number of issuers of distressed debt decreased from 238 in the fourth quarter of 2023 to 227 in the first quarter of 2024.
The report's authors stated that "the List's decline signals that the default rate will gradually ease in the year ahead, as fewer distressed debt issuers remain."
As interested investors returned to the market, some higher-rated issuers of speculative-grade debt were able to refinance debt with imminent maturities, leading to an upgrade in their ratings in the first quarter.
According to Moody's, the first quarter saw a peak of 5.8% for the speculative-grade default rate. By June, the default rate should stabilise at its historical average of 4.7%, according to the business, and by April of the next year, it should drop to 3.4%.
(Source:www.usnews.com)
According to the report, which was published on Tuesday, these and other heavily indebted businesses suffered within an environment of rising interest rates and inflation.
The majority of these companies were acquired by leveraged buyout firms, according to the research. The majority of defaults under private equity ownership were distressed exchanges, in which debtors collaborated with lenders and investors to reorganise their obligations.
However, Moody's also discovered that the number of issuers of distressed debt decreased from 238 in the fourth quarter of 2023 to 227 in the first quarter of 2024.
The report's authors stated that "the List's decline signals that the default rate will gradually ease in the year ahead, as fewer distressed debt issuers remain."
As interested investors returned to the market, some higher-rated issuers of speculative-grade debt were able to refinance debt with imminent maturities, leading to an upgrade in their ratings in the first quarter.
According to Moody's, the first quarter saw a peak of 5.8% for the speculative-grade default rate. By June, the default rate should stabilise at its historical average of 4.7%, according to the business, and by April of the next year, it should drop to 3.4%.
(Source:www.usnews.com)
