The bankruptcy filing of teen retailer Rue21 on Monday has boosted the U.S. retail loan default rate to 1.7% from 0.9% and the current struggles of another teen retailer may push it to 2.7% in the near term, Fitch Ratings said Tuesday.
A pending bankruptcy by Gymboree would propel the trailing 12-month institutional leveraged loan default rate to that level, said Fitch, which is expecting the rate to spike to 9% on about $6 billion of defaults this year.
That forecast could change depending on what happens to troubled department store chain Sears Holding Corp. SHLD, +2.77% and the bond exchange currently being attempted by J. Crew, said the rating agency. Fitch is also expecting the high-yield retail default rate to finish 2017 at 9% on more than $4 billion of defaults.
Fitch has 11 names on its list of loans and bonds of concern, which pulls together those issuers with a significant risk of defaulting on their borrowings within the next 12 months. The loans list covers $5.6 billion in debt and is led by Sears with about $2.5 billion of at -risk debt, along with Gymboree, Nine West Holdings, 99 Cents Only Stores, True Religion Apparel, Charlotte Russe, Charming Charlie, NYDJ Apparel and Vince.
The list of bonds of concern includes Claire’s Stores, Sears Holdings, Chinos Intermediate Holdings…