The number of global corporate defaults in 2023 has reached 153, following 12 defaults in December, Report informs referring to the international rating agency S&P Global Ratings.

Their number increased by 80% compared to 2022 (85 defaults).

S&P expects economic growth and higher global financing costs will contribute to an increase in defaults: “We expect the US and European trailing-12-month speculative-grade corporate default rates to reach 5% and 3.75%, respectively, by September 2024.”

The US led defaults in 2023 with 96--63% of all defaults globally and 2.6 times the number of defaults in the US in 2022.

There were fewer defaults in Europe in 2023 than in the US, but Europe still had an elevated number of defaults last year, with 30. That is nearly double the number of defaults in the region in 2022 and is its second-highest annual default tally since 2009.

“In 2024, we expect further credit deterioration globally, predominantly at the lower end of the rating scale (rated 'B-' or below), where close to 40% of issuers are at risk of downgrades. We expect financing costs to remain elevated despite the prospect of rate cuts. And while borrowers have reduced their 2024 maturities, a large share of speculative-grade debt is expected to mature in 2025 and 2026,” reads the report.

“Distressed exchanges continued to be the primary reason for defaults in 2023, and they accounted for seven of the 12 defaults in December. There were 72 distressed exchanges last year, well above the five-year average of 51, as issuers became more likely to settle distress out of court. We expect this trend to continue into 2024 since companies may use distressed exchanges as a tool to manage looming maturity dates, especially as high interest rates keep refinancing out of reach for some lower-rated issuers.”

Thus, distressed exchanges became the main cause of defaults in 2023, accounting for more than 40% of defaults for the third year in a row.