Nine rated European issuers defaulted in 2012, affecting debt worth $19.7bn, according to Standard & Poor’s (S&P) annual European Corporate Default Study and Rating Transitions. Seven of the nine entities started the year with speculative-grade ratings, and there was one confidentially rated defaulter that was not rated at the beginning of the year.
The rating agency revealed that the annual corporate speculative-grade default rate in Europe was 2.22% in 2012, compared with 1.57% in 2011, 1.0% in 2010 and 7.69% in 2009. Overall, the default rate for all rated entities in Europe was 0.59% in 2012, compared with 0.35% in 2011, 0.18% in 2010 and 1.42% in 2009. No investment-grade entities defaulted in Europe in 2012.
Europe’s financial companies were more likely to suffer rating downgrades in 2012 than its non-financial companies. Nearly 29% of the 544 European financial institutions rated by S&P were downgraded in 2012 while just 4% were upgraded. In contrast, 18% of the 650 European non-financial companies in S&P’s database at the start of 2012 had lower ratings at the end of the year than they did at the beginning (including seven rated entities that defaulted), while 9% had higher ratings.
The weaker credit profiles of some sovereigns, as well as the economic and financial challenges that Europe is facing, contributed to the increase in downgrade activity among banks and insurance companies, said S&P.
Sally Percy is editor of The Treasurer