(Telestock) – S&P expects default rate of European corporates with speculative grade ratings on 12 months reduced to 4.25% by June 2025, compared to 4.7% in June 2024. This is what emerges from the new report by S&P Global Ratings on the trend of defaults of European companies with speculative grade rating.
This basic projection is consistent with the general trend of the rating agency’s previous forecasts, which noted that defaults could begin to decline gradually over the course of the year. However, the current rate, while elevated, still represents a reduction from a starting level that has historically been higher.
The wave of refinancing activity in 2024 has helped ease near-term liquidity pressures for many companies, but new debt issuance has led to higher financing costs, which could continue to weigh on lower-rated fixed-rate borrowers.
Recent volatility has shown that markets are more vulnerable than expected to unexpected negative events. In the event of an economic downturn, spreads could widen more rapidly than in the past, reducing liquidity just when is more necessary and pushing defaults towards the pessimistic 6% scenario outlined by S&P.