S&P reports 11 global corporate issuer defaults in week ended May 22

By Caroline Salls

Pittsburgh, May 22 - Standard & Poor's said 11 global corporate issuers defaulted in the week ended May 22, bringing the 2009 year-to-date tally to 132, according to an S&P news release.

The ratings agency said that the latest year-to-date count is more than four times the 31 defaulted issuer tally at this time in 2008.

According to the release, eight of this week's defaulted issuers were based in the United States, and three were based in the emerging markets, bringing the corporate default tallies by region to 93 issuers in the United States, seven issuers in Europe, 24 issuers in the emerging markets, and eight issuers in the other developed region, which includes Australia, Canada, Japan and New Zealand.

S&P said the majority of defaults this week stemmed from missed interest payments, which accounted for eight of the 11 defaults this week and 52 defaults this year.

The remaining defaults resulted from a Chapter 11 filing, distressed exchange, and confidential default.

S&P said the number of distressed exchanges has been surging this year, with 34 issuer ratings revised to SD (selective default) as a result of distressed exchanges, compared with 15 issuers in all of 2008 and four issuers in 2007.

S&P said the precipitous increase in defaults reflects a pronounced decline in economic fundamentals and earnings prospects, as well as the continued credit freeze, effectively halting lending to speculative-grade borrowers.

As a result, the ratings agency said a large number of defaults likely will be concentrated in the first two or three quarters of 2009.

S&P said other factors that make the current environment more conducive to defaults include deep recessionary conditions in the United States, a record-high proportion of issuers with speculative-grade ratings, the highest volume of low-rated issuance since 2003, and the seasoning of much of the debt rated B- or lower issued in the past several years.

Because of these factors, S&P said it expects the 12-month trailing U.S. corporate speculative-grade default rate to reach 14.3% by the end of the first quarter of 2010, with a pessimistic scenario of 18.5% and an optimistic scenario of 11.5%.

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