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Number of EMEA companies at highest default risk continued to fall in H1 2018

Publication Date: 31 Jul 2018 - By ReachX Team By ReachX Team
Actionable
Differentiated

Equity Fundamental Equity UK EU ex-UK MENA

The number of Europe Middle East and Africa (EMEA) corporates at the highest risk of default continued to fall over the first half of 2018, according to new research. 

In a note to its clients on Tuesday (31 July), ratings agency Moody’s said the tally of companies from the region it rated at the highest level of default risk, i.e.B3-PD negative and lower, fell to 39 in H1 2018 from 46 at end-2017 and 52 a year earlier. 

The number of companies rated B3-PD negative and lower as a percentage of all rated spec-grade companies in EMEA continued to move below the long-term average of 11.5%, ending at 8.1% in June 2018. This reflected the lower number of companies rated B3-PD negative versus higher overall numbers of spec-grade companies, Moody's said.

But Matteo Versiglioni, Assistant Vice President and Analyst at Moody's, noted: “Looking forward, the number of B3-PD negative and lower companies will likely rise in the next 12-18 months, reversing the downward trend that began in 2017, as a result of downgrades especially among B2-PD and B3-PD rated companies with very aggressive capital structures." 

Transportation companies accounted for the largest portion of high default risk firms at end-June 2018, driven by three downgrades into the list (Moby S.p.A., Dynagas LNG Partners LP and Navios Maritime Acquisition Corporation) and partially offset by one upgrade following the completion of an internal reorganisation and an IPO (CEVA Group).

Moody’s Liquidity Stress Indicator (LSI) also reached a new record low in H1.

The agency said no rated energy or metals and mining companies had weak liquidity at end-June. "Given refinancing activities over the past 12 months and supportive financial markets, the composite LSI will remain in the mid-to-high single digits in percentage terms over the next 12 months," it concluded. 

 

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