S&P Global Ratings' 2024 global corporate default tally has reached 98 after the following defaults in August:

• U.S. based provider of portable sanitation and related services and products PECF USS Intermediate Holding III Corp.
• Argentina based company that engages in construction, providing environmental engineering services and public transportation CLISA-Compania Latinoamericana de Infraestructura & Servicios S.A.
• U.S.-based cyber-security software solutions developer Magenta Buyer LLC
• U.S.-based relocation and moving services provider SIRVA Worldwide Inc.
• Germany-based processed wood products manufacturer Pfleiderer Group Spólka Akcyjna
• U.S.-based telecommunications service provider Connect Holding II LLC
• U.S.-based provider of highly engineered solutions for military, government, and commercial customers HDT Holdco Inc.
• U.S.-based manufacturer of products in the packaged vegetables and fruit categories Del Monte Foods Inc.
• U.S.-based owner and operator of general acute care hospitals Community Health Systems Inc.
• Mexico-based petrochemicals producer Grupo Idesa S.A. de C.V.
• U.S.-based manufacturer of cosmetics products Avon Products Inc.

Total Defaulted Debt More Than Doubled

While the number of defaults grew by only two issuers this month, the defaulted debt amount has increased considerably to $14.9 billion from $6.4 billion in July, mostly because of U.S. defaults. European defaulted debt decreased to $0.68 billion, from $2.3 billion in July. So far this year, the monthly defaulted debt amount has only been higher once--in March when it hit $16.3 billion (see chart 1). The share of U.S. defaulted debt has increased to 95.4% of total defaulted debt from 63.9% in July.

Unlike in July, when most defaulted debt came from the media and entertainment sector, the U.S. high technology ($4.3 billion) and telecommunication ($3.6 billion) sectors were the main contributors to defaulted debt volumes in August (see chart 2). The defaulted companies in these sectors opted for distressed exchanges, without which they would likely have faced meaningful liquidity challenges throughout 2024. Overall, 98% of defaulted debt in August was from distressed exchanges.

Chart 1

Chart 2

The U.S. Accounted For More Than 70% Of Defaults In August

After a slight lull in defaults in June and July, defaults in August increased by two from the previous month to 11. The global corporate default tally has now reached 98 compared to 107 for the same period in 2023. It is now just above its five-year average of 96 and is the fifth highest tally year-to-date since 2008 (see chart 3).

For the first time since May, the U.S. experienced a month-on-month increase in defaults with more than 70% of total defaults in August mostly due to a rise in distressed exchanges. However, the U.S. tally of 60 is still well below the 2023 year-to-date level of 69.

In Europe, monthly defaults slowed in August, with only one default compared to four defaults in July. This is the lowest monthly default count in Europe since July 2023, which may be an early indicator of what is to come. Despite the limited number of defaults this month the total tally is now 27, which is 42% higher than the previous year-to-date tally and the highest year-to-date count since 2008.

Global corporate defaults are still elevated but our base case is that U.S. and European speculative-grade default rates will fall to 3.75% and 4.25%, respectively, by June 2025. This baseline projection is in line with the general trajectory of our previous forecasts, in which we noted that defaults could begin to gradually decline later this year.

Chart 3

Chart 4

Distressed exchanges comprise 55% of defaults so far in 2024

Distressed exchanges accounted for 82% of defaults in August compared to 67% in July and represented 55% of year-to-date defaults. With 54 defaults, distressed exchanges remain at their highest since 2009. Some lower-rated issuers are using distressed exchanges as a way to ease near-term debt burdens and financing costs amid weaker cash flows. This has arguably pushed the default rate higher than its long-term average, but the pace of distressed exchanges should ease as interest rates decline (see chart 5).

Chart 5

Consumer Facing Sectors Led Year-to-Date Defaults

Most defaults continue to be in consumer-facing sectors such as media and entertainment and consumer products. These were the leading sectors in year-to-date defaults with 16 each, followed by health care with 13 (see chart 6). Close to 30% of 'CCC' rated issuers are in consumer-facing sectors, which make them prone to potential default. These issuers remain vulnerable, primarily due to weak operating metrics, weak liquidity, high leverage, and negative free cash flows. That said, the consumer products sector accounted for 27% of defaults in August, with three issuers. Lower-rated issuers in this sector continue to suffer from high borrowing costs, reduced spending among lower-income consumers, the cumulative effects of inflation since mid-2023, and higher promotional spending to aid margin recovery. Stronger expected growth in 2025 could help offset existing debt burdens. Factors supporting solid consumer demand should benefit lower-rated issuers in the near term.

The health care sector also stands out given its relatively large share of issuers, and elevated proportion of weakest links (issuers rated 'B-' or lower and with a negative outlook or on CreditWatch negative). Credit quality has deteriorated in this sector amid prolonged supply-chain bottlenecks. We anticipate a reallocation of investment toward increasing capacity and a stronger supply chain, as growth investments have largely been in mergers and acquisitions. This sector has also been challenged by persistent, albeit shrinking, inflation and unfavorable pricing.

Chart 6

Table 1

Table 2

Related Research

• Avon Products Inc. Downgraded To 'D' From 'BB-' On Chapter 11 Bankruptcy Filing, Aug. 14, 2024
• Grupo Idesa Credit Rating Lowered To 'SD' And Debt Rating To 'D' On Cash Tender Completion On Senior Notes, Aug. 7, 2024
• Community Health Systems Inc. Downgraded To 'SD' From 'CCC+' On Senior Note Repurchase, Aug. 7, 2024
• Del Monte Foods Inc. Downgraded To 'SD' From 'CCC-' On Announced Recapitalization Transaction, Aug. 9, 2024
• HDT Holdco Inc. Downgraded To 'SD' (Selective Default) Following An Amend-And-Extend Credit Agreement, Aug. 13, 2024
• Connect Holding II LLC (Brightspeed) Downgraded To 'SD' From 'CCC'; Secured Debt Ratings Lowered To 'D', Aug. 16, 2024
• Pfleiderer Group B.V. & Co. KG Downgraded To 'SD' (Selective Default) On Debt Restructuring, Aug. 15, 2024
• SIRVA Inc. Downgraded To 'SD' From 'CCC' On Distressed Debt Exchange; Issue-Level Ratings Lowered To 'D', Aug. 22, 2024
• Magenta Buyer LLC Downgraded To 'SD' From 'CCC' Following Distressed Debt Exchange, Aug. 27, 2024
• Argentine Conglomerate CLISA Downgraded To 'SD' From 'CC' On Missed Interest Payment, Aug. 27, 2024
• PECF USS Intermediate Holding III Corp. Downgraded To 'D' On Distressed Debt Exchange, Aug. 29, 2024
• The U.S. Speculative-Grade Corporate Default Rate Will Continue Its Descent, Reaching 3.75% By June 2025, Aug. 19, 2024
• The European Speculative-Grade Default Rate Will Level Out At 4.25% By June 2025, Aug. 22, 2024
• Emerging Market Re-Defaulters' Business Overhaul Plans May Be Falling Short, July 18, 2024

Default Studies

More analysis and statistics are available in our annual default studies, published on RatingsDirect:

Corporate (financial and nonfinancial)

• 2023 Annual Global Financial Services Default And Rating Transition Study
• 2023 Annual Global Corporate Default And Rating Transition Study
• 2023 Annual U.S. Corporate Default And Rating Transition Study
• 2023 United Kingdom Corporate Default And Rating Transition Study
• 2023 Annual European Corporate Default And Rating Transition Study
• 2023 Annual Japanese Corporate And Public Finance Default And Rating Transition Study
• 2023 Annual Asia Corporate Default And Rating Transition Study
• 2023 Annual Taiwan Ratings Corp. Corporate Default And Rating Transition Study
• 2023 Annual Emerging And Frontier Markets Corporate Default And Rating Transition Study
• 2023 Annual Greater China Corporate Default And Rating Transition Study

Structured finance

• 2023 Annual Global Structured Finance Default And Rating Transition Study
• 2023 Annual Japanese Structured Finance Default And Rating Transition Study
• 2022 Annual European Structured Finance Default And Rating Transition Study
• 2023 Annual Taiwan Structured Finance Default And Rating Transition Study
• 2022 Annual Mexican Structured Finance Default And Rating Transition Study
• 2023 Annual Global Leveraged Loan CLO Default And Rating Transition Study

Public finance

• 2023 Annual U.S. Public Finance Default And Rating Transition Study
• 2022 Annual International Public Finance Default And Rating Transition Study
• 2022 Annual Mexican National Scale Corporate And Public Finance Default And Rating Transition Study

Sovereign and international public finance

• 2023 Annual Global Sovereign Default And Rating Transition Study