S&P: U.S. corporate defaults on the rise; preliminary July default rate estimate hits 2.25%

By Caroline Salls

Pittsburgh, Aug. 1 - Standard & Poor's said corporate defaults in the United States have started to rise as financial markets continue the malaise that began nearly a year ago.

In an article published Friday titled "U.S. Credit Metrics Monthly Defaults Continued to Rise Through July," S&P said relevant credit metrics within the United States show continued deterioration of credit quality alongside a prolonged contraction of new issuance and tightening credit conditions.

"Corporate defaults continue to rise as expected," S&P's Diane Vazza said in a ratings agency news release.

"With seven U.S. defaults in July, this brings the year-to-date total to 44."

S&P said this easily exceeds the combined 16 and 22 defaults in full-years 2007 and 2006, respectively.

According to S&P, the preliminary estimate for the U.S. 12-month trailing speculative-grade default rate in July is 2.25%, which would mark an increase from 1.92% in June and 0.97% in December 2007.

"We expect the speculative-grade default rate to escalate to a mean forecast of 4.9% by June 2009," Vazza said in the release, "but it could reach as high as 8.5% if economic conditions are worse than expected."

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