J. Crew Distressed Exchange Lifts Retail Default Rate, Possible IHeart Bankruptcy a Concern: Fitch

Fitch Ratings said Thursday the U.S. retail trailing 12-month high-yield default rate rose to 2.9% mid-month from 1.8% at the end of June, after J. Crew completed a $566 million distressed debt exchange. The overall high-yield default rate fell to 1.9% in mid-July from 2.2% at end-June as $4.7 billion of debt rolled out of the default universe. "Even with energy prices languishing in the mid $40's, a likely iHeart bankruptcy and retail remaining the sector of concern, the broader default environment remains benign," said Eric Rosenthal, Senior Director of Leveraged Finance, in a note. Fitch is still expecting Claire's Stores, Sears and Nine West Holdings to default before the end of the year, pushing the default rate to 9%. "The timing on Sears and Claire's is more uncertain, and our retail forecast would end the year at 5% absent these filings," said Rosenthal.