Moody's global junk default rate climbs to 1.7% in April

By Caroline Salls

Pittsburgh, May 7 - Moody's Investors Service reported that its global speculative-grade default rate increased to 1.7% for the 12 months ended in April from 1.5% in March.

Moody's said the global rate stood at 1.6% a year ago.

The U.S. speculative-grade default rate also edged higher in April to 2.1% from a revised level of 1.8% in March, according to the Moody's release. In April 2007, the U.S. default rate was 1.5%.

"We expect continued upward pressure on default rates over the next year as issuers increasingly feel the effects of slower economic growth and reduced access to credit markets," Moody's Kenneth Emery said in the release.

Moody's said it now predicts that the global speculative-grade default rate will rise sharply to 5% by the end of this year and increase further to 6.1% a year from now.

For U.S. speculative grade issuers, Moody's said it foresees default rates increasing to 5.7% by the end of this year.

Across industries over the coming year, Moody's said the construction and building sector will be the most troubled industry in the United States and the durable consumer goods sector will have the highest default rate in Europe.

Moody's said its speculative-grade corporate distress index, which measures the percentage of rated issuers that have debt trading at distressed levels, edged lower to 21.3% in April from 24.5% in March.

The ratings agency said this is the first time that the index has declined since last summer, but the current level is much higher than the level of 1.3% recorded in June 2007.

A total of seven Moody's-rated corporate issuers defaulted in April. Five of the defaulters were based in the United States and two were based in Canada.

Through April, 22 Moody's-rated issuers have defaulted in 2008.

Measured on a dollar volume basis, Moody's said the global speculative-grade bond default rate was 0.9% in April, unchanged from its revised March level. A year ago, the global dollar-weighted bond default rate was 1.0%.

Among U.S. speculative-grade issuers, the dollar-weighted bond default rate edged higher to 1.1% in April from March's revised level of 1.0%.

In the leveraged loan market, no Moody's-rated loan issuers defaulted in April. The trailing 12 month U.S. leveraged loan default rate remained unchanged at 1.5%.

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