Fitch: U.S. high-yield defaults to top 2% in May
18 May 2012
, by Mia Lamar (MarketWatch) http://www.marketwatch.com/story/fitch-us-high-yield-defaults-to-top-2-in-may-2012-05-18The rate of U.S. high-yield defaults is likely in May to hit the highest level since October 2010 following two major bankruptcy filings this month, according to Fitch Ratings
The firm said the recent bankruptcy filings of mortgage lender Residential Capital Corp. and aircraft maker Hawker Beechcraft Inc. will add $3.4 billion
to the April year-to-date default tally of $5.8 billion
, putting the default rate on track to top 2% in May.
Residential Capital, the mortgage subsidiary of Ally Financial Inc., filed for bankruptcy protection early Monday, potentially paving the way for Ally to sever itself from substantial litigation that has been a drag on its other operations and prevented it from repaying the remainder of its government bailout.
Hawker Beechcraft filed for Chapter 11 protection on May 3 after being crippled by $2.5 billion
Noting the pace of defaults this year is running ahead of last year's activity, Fitch said Friday that the count of defaulted issuers now stands at 16, more than double the level seen at the same point last year.
It added that the par value of bonds affected by defaults is up even more substantially, totaling $9.2 billion
thus far this year versus $1.7 billion
The ratings firm said defaults continued to originate overwhelmingly from issuers rated triple-C or lower, a highly speculative class of debt, showing weak companies aren't receiving a free pass despite investors' appetite for higher yields.