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.
The U.S. economy is growing, but at a muted pace, and choppy credit markets are limiting financing for companies perceived as risky. And a collapse in the prices of oil, gas, coal and other commodities has energy and mining companies on the ropes.
Unsurprisingly, the energy sector drove the latest uptick in the Moody’s list. Oil and gas companies such as Chesapeake Energy Corp.CHK +28.53% and SandRidge EnergyInc.SDOC +18.59% account for 31% of the latest tally, up from 14% in March 2015.
Next in line was the services sector, followed by retail, an industry whose struggles were center stage in Wednesday’s bankruptcy filing by The Sports Authority Inc.