S&P Global sees jump in defaults by junk-rated European firms

LONDON (Reuters) - Europe is likely to see the default rate by 'junk'-rated firms almost quadruple to 8% over the next 12-months, credit rating agency S&P Global said on Tuesday.

S&P warned last week that the European economy was set for at least a 2% recession this year, but possibly as deep as 10% if the current coronavirus lockdowns lasted four months.

The ratings agency said the oil and gas sector is likely to be "particularly hard hit" due to the rout in crude prices.

Last year's default rate by European firms in the speculative grade bracket, also known as 'junk', was 2.2%.

Italian bank UniCredit said on Tuesday that the high-yield market was underestimating "the potential severity of the disruption to economic activity the outbreak is likely to cause".

UniCredit estimated that high-yield default rates across Europe could soar to about 12%, close to levels seen during the global financial crisis in 2008.

(Reporting by Joice Alves; editing by Marc Jones and Tommy Reggiori Wilkes)