There 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.

This entry was posted on Wednesday, September 12th, 2007 at 11:50 am and is filed under Corporate Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.