Apr 29, 2020 - Economy & Business

Nearly a third of U.S. debt is now distressed

Adapted from S&P Global; Chart: Axios Visuals
Adapted from S&P Global; Chart: Axios Visuals

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.

Go deeper: How to deal with debts in a pandemic

Go deeper