Rising Interest Rates Raise Default Risks for Junk-Rated US Firms with $1.87 Trillion in Debt Coming Due

Default and refinancing risks are increasing for junk-rated US companies as interest rates stay high and financial conditions tighten.

About $1.87 trillion of below investment grade corporate debt is maturing between 2024-2028, a 27% jump from last year.

Moody's expects the US speculative-grade default rate to peak at 5.6% in January 2024 before easing to 4.6% in August 2024.

Issuance of credit remains low while borrowing costs have come down but are still higher than pre-pandemic levels.

A greater share of maturing debt is from more distressed, lower-rated companies, raising refinancing risks.