Global Corporate Defaults Just Hit 100, On Pace To Surpass Financial Crisis Record

Tyler Durden's picture

The bizarre financial paradoxes unleashed by central planning continue.

While the S&P rises to new all time highs day after day, the IMF is about to downgrade global growth again, $13 trillion in global bonds trade with a negative yield, and the shape of the US yield curve is where it was the last time the US entered a recession. But what remains the most perplexing aspect of the unprecedented disconnect between market surreality and fundamentals, is the ongoing surge in corporate defaults, which is now on pace to surpass 2009, the worst year in history for corporate bankruptcies.

According to S&P, with half of 2016 in the history books, corporate bond defaults just hit the milestone "century" mark, or 100, last week, rising by 50% from the number of bankruptcies at this time last year and the highest level since the US emerged from recession in 2009. The number rose by four to 100 in the first full week of July, as defaults in the US oil and gas sector ratcheted higher, according to Diane Vazza of S&P Global Ratings, the FT reports.

As a result, the total amount of defaulted debt has risen to $154 billion.

But what is most troubling is that at the current run-rate, with half of 2016 still to come, the global debt default total is on pace to surpass 2009 for the all time corporate bankruptcy record.


And somehow this soon to be historic default cycle is supposed to be taking place in a time when not only has no major economy admitted it is in a recession (because, as everyone knows, it is all about confidence) but the S&P 500 keeps making new record highs daily.

Defaults have - so far - been led by energy companies, specifically low-rated crude producers, which have been slammed with a shortage of liquidity unable to secure (or refi into) new debt since oil began to tumble two years ago, while collateral bases shrunk substantially. That has forced many companies to renegotiate debt obligations with creditors, file for bankruptcy protection or miss interest payments.

More bankruptcies in the massively indebted energy sector are guaranteed as oil still trades at prices below profitable levels for many energy producers, and especially those with significant junk debt.

The latest defaults included distressed debt exchanges from oil group MD America Energy and FTS International, the largest private well servicer in the US, as well as a missed payment by telecommunications group Goodman Networks. S&P believes US defaults will rise to 5.3% less than one year from now, up from 3.8% a year ago.

“So far, there has been little spillover effect into other sectors, but we are not ruling this out in the coming quarters,” Vazza said. “We also expect this stress on many US oil and gas companies to persist with continued low oil prices.”

We, on the other hand, expect that - as the following chart from Morgan Stanley clearly shows - as the corporate default cycle is only now starting to ramp up, that the inevitable tsunami of bankruptcies will ultimately be the catalyst that forces the central banks to lose control as there is only so much insolvent reality that the "magic men" can bend to their will.

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yogibear's picture

The Central banksters keep pushing for more debt and printing. All think like Bernanke.

Zimbabwe Bernanke hasn't changed his ways whereas Greenspan has. Greenspan sees gold as the salvation.

It's why he asked: "Why do banks hold gold?"

thefinn's picture

Yeah I won't even diss him too much because anyone with experience knows it can look FAR different when you're outside looking in. Without the stress and pressure, you can get a better view sometimes.


With his experience on top of it, I sure wish they'd listen to him right now.


StackShinyStuff's picture

And somehow none of this seems to matter

Silver Bug's picture

We are living through a slow crash of epic proportions. A major watershed moment is coming and most are blissfully ignorant. Sadly, most are going to be destroyed by this crash. Time is running short to move into precious metals and protect yourself.

tarsubil's picture

It's okay! The higher rates will cover for more defaults!

wmbz's picture

Hot damn! Moar good news! There is only one way to handle this, get to print'n in ernest!

Failure is not, I repeat not an option!

Iconoclast's picture

Staggering, only QE to infinity and deep NIRP can save us..


Bismarckrises's picture

When helicopter money becomes worthless, there will be more defaults

SallySnyd's picture

Here is an article that clearly explains the danger of the looming debt trap:


It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something.

new game's picture

used to be at free market base rates 3X debt to gdp or income things started to come unglued. but a zero bound tolerance threshold could be 5 X. looooooooong way to go...

this is what the doomers miss in their end of world bond market bubble of all bubbles analysis.

so, at zero, when principle chew .4 or .5 of income, shift the deck chairs, cue the band and forget the life boat as they are all gone. best to get a quickie and drink royal straight for last buzz...

new game's picture

world gone mad. get cheap money, start "legite" business, drill, sell something, import/resell, invest, skim massively by legal means, and default and live big ever after...

gotta luv capitolism

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jul 15, 2016 6:52 AM

Defaults aren't a bad thing, its good to flush zombies out of the system regularly.  Too bad central banks don't think so

hooligan2009's picture

Don't worry - the Fed is shaping up an oil company bail-out to mirror the bank bail-out. It will print money into a OOMA (Oil Open Markett account instead of SOMA holdings, there will be oil company holdings).

Then when drug companies fail, it will print money and bail them out too - creating a DOMA

There will be a TOMA for telecoms

A FOMA for FANNG (+Uber, Starbicuks and Tesla).

A SLOMA for student loans

and of course the COMA for car loans and a MOMA, JOMA, MOMA2 and another COMA2 for moslems, jews, mormons and catholics

We could even get BOMA, HOMA, WOMA, COMA3 and MOMA3 for Bllacks, Hispanics, Whites, Chinese and Mulattos

The peniltimatel one will no doubt be the MICOMA so that they can bail out arms manufacturers when a war against terrorism is lost.

Lastly there will be MOMA4 and WOMA where it will be gender based bailouts as long as you are male or female - not sure about LBGTOMA or FSA they don't risk much for anyone else already.

So, someone release a youtube vid of all the OMAs and the POPA's (possies Off People's Army)


I promised I would destroy Corporatism wholesale back in March of 2008 and here we are, Central Intelligence Agency. This means that you are next, CIA.