NEW YORK--(BUSINESS WIRE)--February 2016 marks the 10th straight month there was a leveraged loan default in either the energy and/or metals/mining sectors, according to a Fitch Ratings report.
Noranda Aluminum Holding Corp. and Paragon Offshore filed for bankruptcy earlier this month. The energy trailing-12-month (TTM) default rate is expected to hit 11% in February, up from 9.8% in January, while metals/mining will approach 25%, up from 22.6% in January. More energy defaults are expected over the course of the year.
"Over the last 12 months, 16 of the past 29 defaults have come from energy or metals/mining. Seventy-five percent of the Chapter 11 filings over the past three months are from these two troubled sectors," said Eric Rosenthal, Senior Director of Leveraged Finance.
Low oil prices have curtailed energy term-loan volume, with no new loans since September. Of the current energy outstandings, just 6% has originated since the second-quarter 2015.
January 2016 saw three Chapter 11 filings totalling $3.3 billion of loan defaults, the largest amount registered in a year. Arch Coal Inc.'s $1.9 billion default was the most significant. In addition, NewPage Corp. and RCS Capital Corp. produced the first defaults in the paper and containers and the banking and finance sectors since 2011 and 2012, respectively.
The TTM default rate finished January at 1.5%, down from 1.7% at year-end 2015, due to the one-year anniversary of Caesars Entertainment Operating Co.'s default.
For more information, a special report titled "Fitch U.S. Leveraged Loan Default Insight: Energy, Metals/Mining February Default Rates Reach New Heights" is available on the Fitch Ratings web site at www.fitchratings.com or by clicking on the link below.
Additional information is available at 'www.fitchratings.com'.
Fitch U.S. Leveraged Loan Default Insight (Energy, Metals/Mining February Default Rates Reach New Heights)