Join our community of smart investors
OPINION

Chart: UK shares at risk of default

Chart: UK shares at risk of default
January 4, 2016
Chart: UK shares at risk of default

The scale ranks from IG1, the lowest-risk investment grade, to DS5, which comes with a 50 per cent or higher chance of default. As of 22 December, there were 120 UK-listed companies with a ranking of at least HY3 (equivalent to high-yield or non-investment grade). That lowest rung includes embattled miner Anglo American (AAL), and while the equities ranked as distressed are littered with tiny failed resources stocks they do include former large players such as Gulfsands Petroleum (GPX), whose share price has fallen more than 99 per cent since the start of 2011.

The chart below lists those companies, ordered by their default risk ranking and grouped by market capitalisation. Unsurprisingly, most of the distressed companies have been heavily sold off and are no longer large enough to fall into the IC’s coverage.

 

High yield and distressed UK equities (as of 22 Dec)

However, a number of larger firms creep into the HY6 category – a junk rating which puts the risk of default between 6 and 10 per cent. These include troubled Kurdistan-based oil producer Gulf Keystone Petroleum (GKP), debt-swamped copper miner KAZ Minerals (KAZ) and mobile payments group Monitise (MONI), which has been shedding clients as rapidly as senior management this year.

Naturally, most companies in this group will have suffered bad news, but in 2016 we will be watching closely for any companies whose shaky credit ratings edge them into these categories.