Storm clouds gather over highly indebted companies, Moody’s says

Credit ratings agency Moody’s Investors Service Inc said on Wednesday it has pushed more highly indebted companies to the bottom of its junk ratings barrel and that debt defaults are also on the rise as financing conditions tighten.

The number of companies rated B3 negative or lower by Moody’s rose to 227 in the first quarter of 2023, a 4% increase from the fourth quarter of 2022 and a full third more than the first quarter of 2022, according to two reports from the agency.

That is the highest quarterly figure since August 2021 but still below a pandemic-era peak. The list includes movie theater chain AMC Entertainment Holdings, textbook publisher Houghton Mifflin Harcourt and drugstore chain Rite Aid.

Moody’s cited elevated debt, weak profitability and price pressure among the reasons for the downgrades.

“We expect the (list) to continue to grow in size, given difficult credit conditions and market volatility…,” analysts wrote in one of the two reports.

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