DIVE, DIVE, DIVE! Number of Troubled Companies Nears 2009 Peak.
Financially strapped companies’ ranks are swelling.
A Moody’s Investors Service tally of the least-creditworthy companies rose by 10 to 274 this month, pushing it nearer to April 2009’s record 291. The list comprises companies rated at least six notches into junk territory with a negative outlook–which suggests a further downgrade could come soon.
The uptrend is a sign that while the U.S. high-yield default rate remains below its long-term average (3.1% now versus 4.7% since 1983, per Moody’s), more corporate borrowers are finding themselves on shaky financial ground.Article Continues Below
We’ve had a consumer economy running on credit, and now reality is catching up with us like Mephistopheles coming for Faustus. Remember, when interest rates go up just a little, the economy seizes up like a motor run out of oil.