B2B Payments

Biz Loan Defaults At Six-Year High


Corporate loan defaults around the globe are at their highest level since 2009, according to a Nov. 30 report by The Wall Street Journal.

Reports noted several factors leading to businesses failing to repay their loans on time, including the rising value of the U.S. dollar, which has increased the burden on foreign companies that borrowed in USD.

Standard & Poor’s data found that loan repayment defaults are at a six-year high in emerging nations, up 40 percent compared to last year. This marks the first time in several years that companies in developing nations are defaulting on loan repayments more than companies in the U.S., reports said.

The latest data from Barclays says emerging-market corporate high-yield debt now has a 3.8 percent default rate, 1.3 percent higher than that of the U.S., reports noted.

That’s compared with the 0.7 percent default rate seen among companies in emerging nations just four years ago.

The WSJ highlighted how loan defaults are straining relationships between borrowers and lenders, too, especially in Asia. The publication cited statistics from the Institute of International Finance, which concluded that a significant portion of the $23.7 trillion in corporate debt across the globe – five times higher than it was a decade ago – stems from emerging parts of Asia.

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Reports pointed to a combination of businesses in developing nations looking for working capital to strengthen operations and prop up local economies, while investors looked to take advantage of low interest rates in these regions.

“The taps are now drying up,” The WSJ reported. “Waning lender appetite and the growing inability to raise capital despite low interest rates has left bond issuance in emerging markets down almost 30 percent from a year ago.”

The publication added that some analysts anticipate loan default rates to rise among Asia-based businesses, especially due to China’s slowing economic growth.



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