Fitch Ratings forecasts that this year's high-yield default rate will increase to 3% to 3.5% compared with September's 2.5% to 3.5% rate. The ratings agency cited macroeconomic factors, including sluggish GDP growth and its prediction of a U.S. recession starting midyear. Last year, the default rate was 1.3%.
Increase in high yield and leveraged loan default forecasts
Fitch now expects a 2.5% to 3% leveraged loan default rate this year, up from its prior 2% to 3% forecast. Next year, it has a 3.25% to 4.25% (3%-4% previously) forecast. For 2022, the default rate was 1.6%.
Fitch expects 2023 high-yield bond and leverage loan default rates to increase significantly for the broadcasting and media, leisure and entertainment, telecommunications, and retail sectors. This includes large potential bankruptcy filings from Bed, Bath & Beyond, Ligado Networks and Avaya, among others.
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