Hidden defaults in firms set to soar on recession

HONG KONG: The worst recession since the Great Depression is prompting indebted companies to default, and increasingly more will do so in a way that’s harder for investors to detect.

Rating firms predict that more companies will pursue distressed debt exchanges, in which they try to overcome liquidity problems by swapping debt or buying it back at steep discounts. Such moves are less stark than missed payments and can fly under the radar for the general investing public, but often result in losses for creditors and are usually counted as defaults by rating companies.