The default rate of the S&P/LSTA Leveraged Loan Index reached a 14-month high of 1.96% in May as four issuers—Fairway, Dex Media, Seventy Seven Operating, and Atlas Iron—defaulted. The rate was 1.69% at the end of April.

Excluding the Energy Future Holdings/Texas Competitive Electric Holdings’ April 2014 default—the largest in the history of the Index, representing 3.4% of outstandings—the rate by principal amount stands at the highest level since December 2013, when it was 2.11%.

While these trend lines support manager expectations that the credit cycle is closer to the end than the beginning, 2016’s default stats have been inflated by the troubled oil-and-gas and metals-and-mining sectors. In the year to date, these two industries have accounted for 64% of defaults by principal amount and 60% by number of issuers. These include two of May’s four defaults, Seventy Seven Operating and Atlas Iron. – Kerry Kantin

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