More than 30% of debt from U.S. companies is trading at distressed levels, ratings agency S&P Global reports.
The state of play: "The U.S. distress ratio grew considerably to 30.2% as of April 10 from 24.9% as of March 16, with the highest proportion of distressed credits held by oil and gas issuers and financial institutions," analysts said in a recent note to clients.
- Almost 70% of all debt in the oil and gas sector is trading at distressed levels and four other sectors have a distress ratio higher than 35%, including retail and restaurants (44.6%), transportation (43.2%), automotive (36.7%) and midstream and merchant power (36.5%).
- Bond spreads for U.S. companies have "widened at unprecedented levels, especially at the speculative-grade level, where issuance has all but disappeared," S&P notes.
What it means: Distressed debt refers to bonds trading at significant discounts because a company has or is likely to file for bankruptcy or default.
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