An article on the Financial Post reports a total of 133 defaults by global companies so far this year, as tracked by Standard & Poor’s. The tally has already exceeded last year’s total of 113.
According to the ratings agency, the rise in defaults is led by the struggling energy and natural resources sector, which experienced 71 defaults, or 53% of the total.
Among the beleaguered entities are six Canadian oil and gas companies: Pacific Exploration and Production Canada Corp., Trident Resources Corp., Perpetual Energy Inc., RGL Reservoir Management Inc., Tervita Corp. and Lightstream Resources Ltd.
In addition, Korean-owned and Alberta-based Harvest Operations Corp. defaulted as a result of a distressed exchange on its debt – in other words, a transaction that ended with the company getting less than what had been promised in its original securities.
Also defaulting due to distressed exchange transactions were Perpetual Energy and RGL Reservoir Management. The defaults of Pacific Exploration and Production Canada, Trident Resources, Tervita, and Lightstream Resources were due to missed interest payments.
S&P reported a speculative-grade default rate of 17.9% for the energy and natural resources sector, a great deal higher than the 2.4% determined for all other sectors.
Recent weeks have seen the price of oil rise above $50 on the strength of investor activity, but until OPEC and other producers settle on a price cap – a critical policy item tabled for an Algeria meeting slated for next month – price volatility is possible. The US Energy Administration reports national crude oil inventory growth of 4.9 million barrels in the week ending Oct. 7, bringing the total up to a higher-than-average 474 million barrels.
According to S&P, the last time its global default tally reached this level so early in the year was 2009, when it rose to 234 in the thick of the global financial crisis.
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