S&P Global sees European default rate climbing to 6.5pc by year end

LONDON: Default rates in Europe are expected to climb to 6.5% by the end of the year, a new report from credit rating agency S&P Global said on Tuesday.

Rising borrowing costs as a result of higher bond market yields would hit heavily indebted firms "quite hard" particularly in COVID-19-exposed industries, such as leisure or transportation, S&P added.

Currently, 14% of European corporate speculative-grade credits are rated at 'B-' or below and are on downgrade warnings -- 'negative outlooks' or 'CreditWatch negative' in rating agency parlance.

"Our base case expectation is that the speculative-grade default rate in Europe could reach 6.5% by the end of the year, up from 5.4% at the end of February 2021," S&P's report said.