Moody’s Report: Corporate Defaults to Surge
September 12th, 2007There was an interesting article that I caught on marketwatch yesterday about how Moody’s expects corporate defaults to double in the next year to 4% (see article here). This more or less expresses the sentiment from my previous blog (see here), and is consistent with what I’ve been writing over the past few months.
Alistair Barr (from marketwatch) writes:
Few companies have struggled to repay debt in recent
years, mainly because booming credit markets allowed weak businesses to
get rescue financing to avoid bankruptcy. However, this summer’s credit
crunch has changed all that, Moody’s said.
“Going forward … many
more weak companies will be unable to obtain new financing and will
default either when debt maturities come due or when they run out of
cash,” the agency said.
As I’ve mentioned previously, the next leg down should be increased bankruptcy activity as firms that
were saddled with too much debt become unable to service that debt and unable to refinance. The intensity of this effect depends critically upon the slowdown of the U.S. economy and the severity of the credit crunch.
