(Il Sole 24 Ore Radiocor) – Milan, August 23 – S&P Global Ratings expects the default rate for speculative-rated European companies to fall to 4.25% over the 12 months between June 2024 and June 2025. That would be a slight decline from the 4.7% default rate recorded in the 12 months to last June, but the value would remain high, S&P analysis shows. The forecast is in line with previous expectations, which found that defaults could start to gradually decline over the course of this year, thanks to the European Central Bank’s monetary policy easing and slightly stronger economic growth in 2025. However, the figure currently represents a decline from a historically higher starting point.
The large volume of refinancing activity in 2024 has helped ease short-term liquidity pressures for many companies, but new debt issuance has pushed up funding costs, which could continue to weigh on lower-rated fixed-rate borrowers. In an optimistic scenario of higher-than-expected economic growth, lower inflation and lower interest rates, the default rate could fall to 2.5%. However, S&P analysts note that recent volatility has shown markets are more vulnerable to unexpected adverse events than expected. In the event of a recession, spreads could widen more rapidly than in the past, reducing liquidity precisely when it is needed most and pushing defaults toward the 6% pessimistic scenario.
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(Radiocore) 08-23-24 13:15:19 (0253)Euro 3 NNNN
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