Moody's global junk default rate decreases in first quarter to 2.4%

By Caroline Salls

Pittsburgh, April 8 - Moody's Investors Service's trailing 12-month global speculative-grade corporate default rate finished the first quarter at 2.4%, down from 2.8% at the end of 2012, according to a Moody's default report.

Moody's said the latest reading came in close to the 2.8% rate it forecasted a year ago, when the global default rate stood at 2.6%.

In the United States, the speculative-grade default rate ended the first quarter at 2.9%, down from 3.4% in the previous quarter. A year ago the U.S. default rate was 2.9%.

In Europe, the default rate edged lower to 1.8% in the first quarter from 2% the previous quarter. A year ago the European rate was 3.3%.

Moody's said it now expects the global speculative-grade default rate to edge higher, ending 2013 at 2.8%.

By region, the agency said the comparable rates are expected to fall to 2.6% in the United States and rise to 4% in Europe.

"The global default rate has been remarkably steady over the past year," Moody's Albert Metz said in the report.

"With a combination of accommodative monetary policy and weak fundamental growth, we expect this to continue for the rest of the year."

A total of 20 Moody's-rated corporate debt issuers have defaulted so far this year, of which nine were recorded in March.

In the first quarter of 2012, Moody's said 24 companies defaulted, 14 of which were in March.

By dollar volume, the agency said the global speculative-grade bond default rate closed the quarter at 1.2%, down from 1.8% the previous quarter.

In the United States, the dollar-weighted speculative-grade bond default rate ended the first quarter at 1.3%, compared with 1.7% in the fourth quarter of 2012, and, in Europe, the rate fell to 0.9% in the first quarter from 2.3% in the last quarter.

Across industries over the coming year, Moody's said it expects default rates to be highest in the media: advertising, printing and publishing sector in the United States and the hotel, gaming and leisure sector in Europe.

In the leveraged loan market, eight Moody's-rated issuers defaulted on their loans in the first quarter, and all were from the United States.

Of these, Moody's said five were recorded in March and four were from corporate family Dex One Corp.

The trailing 12-month U.S. leveraged loan default rate ended the first quarter at 2.8%, down from 3.1% in the previous quarter, Moody's reported.

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