US corporate defaults on private debt rose in Q2, Fitch says
In its monitor of roughly 1,200 corporate borrowers of private credit, Fitch reported a default rate of 5.5% in the second quarter versus 4.5% in the first quarter. Eight different borrowers defaulted in the second quarter versus four in the first quarter, it found.
Four of the eight second-quarter defaults arose from maturity extensions by "financially stressed" companies, while three defaults stemmed from interest deferrals and the introduction of payment-in-kind, or non-cash, payments.
One remaining second-quarter default resulted from an "uncured payment default," according to Fitch.
The second quarter witnessed a 16% drop in debt issuance by the U.S. middle market - the cohort of middle-sized businesses that comprise the majority of private credit lending. The volume of new U.S. middle-market debt fell to $11.6 billion in the second quarter from $13.7 billion a year ago, Fitch found.
'Smaller, private issuers remain particularly vulnerable to economic swings, GDP slowdowns, and persistent elevated interest rates, especially given their floating-rate structures,' said Lyle Margolis, Fitch Ratings' head of private credit, corporates.
About three-quarters of Fitch's 1,200 monitored private credit issuers belong to Fitch's rated middle market collateralized loan obligation portfolio, the report noted, while the remaining quarter is privately rated by Fitch for the benefit of insurance companies. (Reporting by Matt Tracy Editing by Marguerita Choy)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The National
4 hours ago
- The National
Microsoft workers protest at company HQ against Israeli ties
Microsoft employees rallied at the company's Redmond, Washington, headquarters to try to increase pressure on the company to stop doing business with Israel over its war in Gaza. Protesters started gathering on Tuesday afternoon at a plaza at the centre of a recently redeveloped part of the company's main base, which covers about 200 hectares in the suburban town. They set up tents and declared the space a 'liberated zone". Addressing 'friends and colleagues' through a microphone, former Microsoft employee and protest leader Hossam Nasr said: 'We are here because over 22 months of genocide, Israel — powered by Microsoft — has been killing, maiming Palestinian children every hour.' About an hour after the activists arrived, a Redmond police officer used his SUV speaker to warn they were trespassing and subject to arrest if they stayed. Soon after, the about three dozen demonstrators packed up their tents, rolled up their banners and departed the plaza. They reassembled on a slice of sidewalk that organisers said was public property. For more than a year, the Microsoft employee group No Azure for Apartheid, has been pushing Microsoft to end its relationship with Israel, saying use of the company's products is contributing to civilian deaths in Gaza. Azure, the company's cloud-computing division, sells on-demand software and data storage to businesses and governments, including Israeli government and military agencies. A handful of No Azure for Apartheid organisers have been fired for holding what Microsoft said was an unauthorised event on campus and disrupting speeches by executives. 'Microsoft is the most complicit digital arms manufacturer in Israel's genocide of Gaza,' Nisreen Jaradat, a Microsoft employee, said in a statement on Tuesday. Microsoft did not immediately respond to a request for comment. In a blog post published in May, the company said it had 'found no evidence to date that Microsoft's Azure and AI technologies have been used to target or harm people in the conflict in Gaza". But Microsoft said this month that it had enlisted the law firm Covington & Burling to conduct a further review after a report that Israel's military surveillance agency intercepted millions of mobile phone calls made by Palestinians in Gaza and the West Bank and stored them on Azure servers. That trove helped the military choose bombing targets in Gaza, according to reporting by The Guardian newspaper and other outlets. The activists took their inspiration from protests staged on at least 100 US university campuses since the war in Gaza began. Students at schools such as Columbia University pitched tents and called for their colleges to divest financial holdings tied to Israel and US weapons makers, in many cases sparking disciplinary action from administrators.
Khaleej Times
10 hours ago
- Khaleej Times
S&P affirms 'AA+' credit rating for US, cites impact of tariff revenue
S&P Global on Monday affirmed its "AA+" credit rating on the US, saying the revenue from President Donald Trump's tariffs will offset the fiscal hit from his massive tax-cut and spending bill. Trump signed the "One Big Beautiful Bill Act" into law in July after it was passed by the Republican-controlled Congress. The bill, which delivered new tax breaks, also made Trump's 2017 tax cuts permanent. "Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending," S&P said in a statement. "At this time, it appears that meaningful tariff revenue has the potential to offset the deficit-raising aspects of the recent budget legislation." The U.S. reported a $21 billion jump in customs duty collections from Trump's tariffs in July, but the government budget deficit still grew nearly 20% in the same month to $291 billion. Interest on the public debt also continued to grow, hitting $1.013 trillion in the first 10 months of the fiscal year, an increase of 6%, or $57 billion, over the prior-year period due to slightly higher interest rates and increased debt levels. Since returning to power in January this year, Trump has launched a global trade war with a range of tariffs that have targeted individual products and countries. The Republican president has set a baseline tariff of 10% on all imports to the U.S., as well as additional duties on some items and trading partners. IMPACT OF TARIFFS S&P, which became the first ratings agency to cut the pristine U.S. government rating in 2011, said the outlook on the U.S. rating remains stable. The ratings agency said it expects the Federal Reserve, which Trump has criticized this year for not cutting interest rates, "to navigate the challenges of lowering domestic inflation and addressing financial market vulnerabilities." It projected the country's general government deficit to average 6.0% of GDP during the 2025-2028 period, down from 7.5% in 2024 and from an average 9.8% of GDP in 2020-2023. S&P said it could lower the rating over the next two to three years if already high deficits increase. "The ratings could also come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve," it said. SP, however, said it could raise the U.S. rating in the event of sustained economic growth and adjustments to the U.S. fiscal profile that would diminish recent increases in the country's debt burden. There was no reaction in markets on Tuesday to SP's credit rating affirmation, which follows a U.S. sovereign credit downgrade by Moody's in May, when that ratings agency cut the triple-A U.S. rating by one notch, citing rising debt levels. The U.S. national debt load surged above a record $37 trillion last week. James Ragan, co-chief investment officer and director of investment management research at D.A. Davidson, said the SP rating affirmation was an acknowledgment of the meaningful tariff revenue generated so far. "That's all good revenue (coming) in, but that's also a drag on the economy, so I think we don't know the impact of that going forward," he said.
Khaleej Times
13 hours ago
- Khaleej Times
Air Canada to resume service gradually after deal to end cabin crew strike
Air Canada's unionised flight attendants reached an agreement with the country's largest carrier on Tuesday, ending the first strike by its cabin crew in 40 years that had upended travel plans for hundreds of thousands of passengers. The strike that lasted nearly four days had led the airline that serves about 130,000 people daily to withdraw its third-quarter and full-year earnings guidance. Shares of Air Canada rose 4% in early trading. They have lost 14% of their value so far this year. The carrier said it would gradually resume operations and a full restoration may require a week or more, while the union said it has completed mediation with the airline and its low-cost affiliate Air Canada Rouge. "The Strike has ended. We have a tentative agreement we will bring forward to you," the Canadian Union of Public Employees said in a Facebook post. Air Canada said some flights will be canceled over the next seven to ten days until the schedule is stabilized and that customers with canceled flights can choose between a refund, travel credit, or rebooking on another airline. The flight attendants walked off the job on Saturday after contract talks with the carrier failed. They had sought pay for tasks such as boarding passengers. While the details of the negotiations were not immediately released, the union said the unpaid work was over. The CUPE, which represents Air Canada's 10,400 flight attendants, wanted to make gains on unpaid work that go beyond recent advances secured by their counterparts at U.S. carriers like American Airlines AAL.O. In a rare act of defiance, the union remained on strike even after the Canada Industrial Relations Board declared its action unlawful. Their refusal to follow a federal labor board order for the flight attendants to return to work had created a three-way standoff between the company, workers and the government. Jobs Minister Patty Hajdu had urged both sides to consider government mediation and raised pressure on Air Canada on Monday, promising to investigate allegations of unpaid work in the airline sector. Over the past two years, unions in aerospace, construction, airline and rail sectors have pushed employers for higher pay, improved conditions and better benefits amid a tight labor market. Air Canada's flight attendants have for months argued new contracts should include pay for work done on the ground, such as boarding passengers. Its CEO had on Monday in a Reuters interview stopped short of offering plans to break the deadlock, while defending the airline's offer of a 38% boost to flight attendants' total compensation. While many customers had expressed support for the flight attendants, frustration with flight cancellations was growing. Retiree Klaus Hickman missed a flight to Toronto earlier in the week. While he rebooked on another airline, he was concerned about returning to Calgary on time for a connecting flight to Germany. Hickman sympathizes with workers demanding better pay but is worried about his own health and travel challenges. "They want to get more money to survive. And so it is with everybody else," he said. Canada's largest carrier normally carries 130,000 people daily and is part of the global Star Alliance of airlines. James Numfor, 38, from Regina, Saskatchewan, had been stranded in Toronto for two nights since returning from Cameroon for his brother's funeral. Air Canada only provided one night in a hotel for his family before leaving them without further support, he said. He had slept in the airport with his family.
