Debt defaults reach 6-year high

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Global defaults on debts have reached the second highest level in a decade, as 99 companies this year have defaulted on their debt.

Data from Standard & Poor’s shows that for the past 10 years only in the financial crisis has there been more defaults, when 222 companies defaulted in 2009, the Financial Times reports.

Of this year’s defaults 62 are US companies, led by the shale gas producers. Around 60 per cent of the defaults in the US have been from energy and natural resources businesses, following the drop in oil and other commodity prices.

Companies are expected to face further challenges when the Federal Reserve raises rates, and those firms that have relied on the low cost of debt and operating costs will be challenged.

However, investors are being paid for some of this increase in risk, with average yields rising from 5.6 per cent at the start of 2014 to 8 per cent now, Barclays data shows.