Banking, finance, and taxes
Energy, Mining Companies Lead Debt Default Rates Higher
Published:
Last Updated:
Coal miner Alpha Natural Resources completed a distressed debt exchange in the first quarter of this year, but it filed for bankruptcy protection just four months later. Such an exchange indicates a subsequent default within one year in nearly two-thirds of cases, according to Fitch.
Arch Coal Inc. (NYSE: ACI) has already announced a distressed debt exchange offer that expires Friday, and at last look, it was getting a lot of pushback from existing lenders who argue that the swap dilutes their claims on the company’s assets. That Arch’s share price was up about 8% could indicate that the company has or is expected to prevail.
At the end of July, the overall corporate default rate for the trailing 12 months stood at 2.5%, up from 2.3% at the end of June. The trailing rate for energy companies stood at 2.5%, with the rate for exploration and production companies at 5%, and metals and mining companies’ rate at 7.1%.
Excluding energy and mining sectors, the corporate default rate for July was 2.3%, and if the bankruptcy filing of Caesars Entertainment Operating Co. is also excluded the overall corporate rate was a “benign 1.1%,” according to Fitch.
In addition to Arch Coal, oil producer SandRidge Energy Inc. (NYSE: SD) Friday announced privately negotiated purchase and exchange agreements under which the company will repurchase $250 million in senior unsecured notes for $94.5 million in cash and exchange $275 million of notes into new convertible notes. Using Fitch’s calculation, within a year the odds are nearly two in three that SandRidge will default.
ALSO READ: 3 Drilling Stocks to Buy Ahead of 2016 Recovery
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.