London May 15 2025: Corporate defaults decreased to eight in April, down from nine in March. Year-to-date defaults reached a two-year low and totaled 34, as of April 30, 2025. This is below the five-year average of 42 and constitutes a decline in year-to-date defaults of 21, compared with 2024 and 2023.
The pace of defaults continues to decrease. This is despite the recent tariff-related market volatility, which has raised concerns about growth and higher default rates.
For now, we maintain our base-case projections for 2025, including speculative-grade corporate default rates of 3.50% in the U.S. and 3.75% in Europe. However, prolonged or increasing tariff uncertainty could raise the rates to 6.00% in the U.S. and 6.25% in Europe by December 2025.
Three Sectors Accounted For Most Defaults
Two-thirds of defaults in April stemmed from health care, media and entertainment, and CP&ES, with each sector accounting for two defaults. Five of these defaults happened in the U.S. and one in Luxembourg. Unsustainable capital structures, high leverage, and negative cash flow generation constituted the main reasons for these defaults. Media and entertainment, consumer products, and health care accounted for half of year-to-date defaults.
Distressed Exchanges Increased To Close To 90%
Distressed exchanges caused seven out of eight defaults in April. Notably, seven of the eight companies that defaulted last month were first-time defaulters. Only U.S.-based Community Health Systems Inc., whose default in April reflected its below-par debt repurchases, had defaulted before. This is the fourth time we lowered the rating on the company to ‘SD’ (selective default) within three years.
Distressed exchanges remain the main cause of defaults. Year to date, they have accounted for 23 defaults or 68% of the total–the highest share since 2008. Missed payments caused seven defaults, while bankruptcies accounted for four.
Health Care And Media And Entertainment Contributed Most To Defaulted Debt
Monthly defaulted debt reached $5.5 billion in April, similar to the debt volumes in March. This figure represents the lowest defaulted debt volume since January 2024, with 82% originating from the U.S. (see chart 5). Defaulted debt in April was concentrated in four sectors, with health care and media and entertainment leading the way.
Cumulatively, health care has accounted for most defaulted debt since the beginning of the year. The sector total of $7.5 billion includes the addition of $1.64 billion in April from the U.S.-based veterinary practice management company Pathway Vet Alliance LLC, which does business as Thrive Pet Healthcare. The company recently completed a debt-exchange transaction that we view as tantamount to a default.
