S&P Global Ratings' 2024 global corporate default tally has reached 109 after the following defaults in September:

• U.S.-based salt mining company American Rock Salt Co. LLC
• U.S.-based home discount retailer Big Lots Inc.
• U.S.-based plastic packaging manufacturer Poseidon Investment Intermediate L.P.
• U.S.-based reusable packaging solutions manufacturer Tosca Services LLC
• Germany-based chemical producer SK Mohawk Holdings S.a.r.l.
• U.S.-based auto part manufacturer and distributer Wheel Pros Inc.
• Mexico-based leasing company Operadora de Servicios Mega, S.A. de C.V. SOFOM, E.R.
• U.S.-based digital solution provider Digital Media Solutions Inc.
• U.K.-based telecom provider TalkTalk Telecom Group Ltd.
• U.K.-based health care equipment company Carestream Dental Technology Parent Ltd.
• U.S.-based energy transition company Vertex Energy Inc.

Europe Recorded A Rise In Defaults In September

Although monthly default totals remained consistent, with 11 defaults each in September and August, the pace of quarterly defaults has slowed. With 31 defaults in the third quarter, quarterly defaults were at their lowest level since 2022 (see chart 1). The decrease resulted mainly from a quarter-over-quarter decline in defaults in the U.S. by five entities or 20%.

Chart 1

Europe is the only region globally where the number of defaults increased in September. Year-to-date defaults, which exceed 2023 levels by 43%, amount to 30, the highest number since 2008.

We expect the default rate will decline, but at a slower pace than it rose, due to residual strain for the lowest-rated borrowers. We forecast a 12-month trailing speculative-grade corporate default rate of 4.25% for Europe and 3.75% for the U.S. by June 2025, down from 4.40% and 4.60%, respectively, as of Aug. 31, 2024 (see chart 2).

Chart 2

Monthly Defaults Increased In The Chemicals and Packaging Services Sectors

European chemicals and U.S. packaging services companies led monthly defaults in September with three, bringing these sectors' year-to-date tally to eight. Most defaults in these sectors occurred in the past four months. European speculative-grade chemical companies are still dealing with weak free cash flows in a tough industry environment and high interest rates, which make it difficult to service debt. Across the pond, U.S. packaging services issuers are contending with a low-growth economy, the aftermath of previously high inflation, lower consumer purchasing power, and a decrease in consumer confidence. Additionally, borrowing costs remain elevated, which significantly impairs the lowest-rated issuers.

Similar to 2023, most year-to-date defaults are concentrated on three sectors. Media and entertainment (17 defaults), consumer products (16), and health care (14) account for 43% of the year-to-date default tally, compared with close to 45% over the same period last year.

We observed that the weakest links--issuers rated at 'B-' and below, with a negative outlook or a CreditWatch negative placement--are most prone to defaults. Although the global weakest link tally has been declining, close to 40% of these issuers are highly concentrated on the consumer products, health care, and media and entertainment sectors. This makes these sectors more likely to continue leading the default tally. Consumer-facing sectors, chemicals and packaging companies, and issuers with a high proportion of floating-rate debt remain most vulnerable to defaults as they suffer from an extended period of negative cash flows and have unsustainable capital structures (see chart 3).

Chart 3

Monthly Defaulted Debt Decreased By 50%

While the number of defaults remained steady over August and September, monthly defaulted debt halved to $7.45 billion in September, following a decline in the amount of defaulted debt in the U.S.

U.S. defaulters had lower amounts of debt outstanding, meaning the share of U.S. defaulted debt declined. The U.S. contributed to 66% of total defaulted debt in September, from 95% in August.

Year to date, September recorded the third-lowest monthly defaulted debt amount in the U.S., after January and July (see chart 4). In contrast, the amount of defaulted debt in Europe slightly increased in September, to $2.5 billion or 34.4% of total defaulted debt. Even so, it remains below the year-to-date high of 40% in June.

Chart 4

Unlike in August, when most defaulted debt came from the telecommunication sector, the automotive and chemicals and packaging sectors were the main contributors to defaulted debt volumes in September, with $3.06 billion and $3.02 billion, respectively (see chart 5). 75% of defaulted companies in these sectors opted for distressed exchanges since they would likely have faced meaningful liquidity challenges in 2024 otherwise.

Chart 5

Distressed Exchanges Account For 54% Of Year-To-Date Defaults

Distressed exchanges remain the leading cause of defaults year to date, accounting for 54% of total defaults or 59 defaults so far in 2024 (see chart 6). This is the highest year-to-date tally of distressed exchanges since 2008. While distressed exchanges were the primary reason of defaults in September, they only contributed to five defaults (45% of the total share), compared with nine in August (82%). This is in line with our expectations that the decline in interest rates may ease the pace of distressed exchanges as some lower-rated issuers are using distressed exchanges to alleviate near-term debt burdens and reduce financing costs amid weaker cash flows.

Chart 6

After four U.S. bankruptcies in September--the second-highest monthly count in 2024, after six in April--the number of U.S. bankruptcies increased to 24 year to date. Most bankruptcies were Chapter 11 filings, with issuers entering into restructuring agreements with existing term loan lenders to commence proceedings.

Table 1

Table 2

Related Research

• Vertex Energy Inc. Downgraded To 'D' From 'CCC-' On Bankruptcy Filing, Sept. 27, 2024
• Tosca Services LLC Downgraded To 'SD' On Debt Exchange; Debt Ratings Lowered To 'D', Sept. 24, 2024
• Carestream Dental Technology Parent Ltd. Downgraded To 'SD' On Distressed Exchange; Ratings Subsequently Withdrawn, Sept. 21, 2024
• SK Mohawk Holdings S.a.r.l. Downgraded To 'D' From 'CCC' On Distressed Exchange, Sept. 20, 2024
• TalkTalk Telecom Group Ltd. Downgraded To 'D' On Receiving Consent From Lenders To Implement Proposed Debt Restructuring, Sept. 19, 2024
• U.S. Containers & Packaging Newsletter: Issuers Emerging From Worst Of Destocking, Sept. 17, 2024
• Poseidon Investment Intermediate L.P. Downgraded To 'SD' From 'CCC+' On Debt Repurchase, Sept. 17, 2024
• Digital Media Solutions Inc. Downgraded To 'D' On Chapter 11 Bankruptcy Filing; All Ratings Subsequently Withdrawn, Sept. 13, 2024
• Operadora de Servicios Mega S.A. de C.V. SOFOM E.R. Downgraded To 'SD' On Missed Interest Payment, Sept. 12, 2024
• Wheel Pros Inc. Downgraded To 'D' From 'CC' Following Chapter 11 Bankruptcy Filing, Sept. 11, 2024
• American Rock Salt Co. LLC Rating Lowered To 'SD' On Missed Interest Payment, Sept. 10, 2024
• The European Speculative-Grade Default Rate Will Level Out At 4.25% By June 2025, Aug. 22, 2024
• The U.S. Speculative-Grade Corporate Default Rate Will Continue Its Descent, Reaching 3.75% By June 2025, Aug. 19, 2024
• Industry Credit Outlook Update Europe: Chemicals, July 18, 2024

Default Studies

More analyses 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
• 2023 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