Almost one quarter of high-yield corporate bond issues in North America are likely to face significant damage due to the Covid-19 outbreak, Fitch Ratings says.

In a new report, the rating agency found that 23% of speculative-grade corporates in Canada and the U.S. have either already suffered “material damage” from the pandemic or are likely to.

Fitch stated that the most vulnerable sectors include airlines, gaming, lodging & leisure, retail, oil & gas, restaurants and mining.

Additionally, 36% of high-yield corporates “have low rating headroom” — meaning that they are likely to face ratings downgrades. Such issues include 50% of those from airlines, 47% from oil & gas, and 44% from restaurants.

“With almost a quarter of Fitch’s North American speculative-grade portfolio in sectors that have high exposure to the coronavirus pandemic and over a third with low rating headroom, we expect meaningful rating migration,” said Michael Paladino, managing director at Fitch.

The report noted that issuers in the ‘B’ rating category “are especially at risk of downgrades due to high sector exposure and low rating headroom.”