Each month, Standard & Poor’s compiles a list of what it calls “weakest links,” or companies most in danger of debt default. The latest iteration was published on May 28. To make the list, companies must have had speculative corporate credit ratings of B- or lower with either a negative outlook or a negative CreditWatch implication on May 18.
Over the long term (1981-2014), an average of 7.5 percent of all global entities Standard & Poor’s rates B- defaulted within 12 months, and the average default rate was much higher for entities rated lower than B-.
On the whole, the latest S&P “weakest links” report totaled 164 companies globally, both sponsored and non-sponsored. The list in its entirety has an affected debt of about $221.4 billion. Of the 164 companies, at least 20 are backed by buyout firms with a total of over $90.5 billion in affected debt. Both of those figures are up from the April 2 edition of the list, the last to be reviewed in this feature. The year’s second quarter also saw seven portfolio companies receive a default rating and two file for bankruptcy.
The downtrodden oil and gas sector continues to be the most vulnerable industry, with seven portfolio companies in that sector appearing on the “weakest links” list. Notable additions to this quarter’s list are the three American Energy companies that have combined affected debt of $6.7 billion.
Sponsors with multiple portfolio companies on the list include Apollo Global Management, the Blackstone Group, Crestview Partners, the Energy & Minerals Group, First Reserve and Welsh, Carson, Anderson & Stowe.