Moody's global junk default rate decreases to 2.3% in first quarter

By Caroline Salls

Pittsburgh, April 7 - Moody's Investors Service's trailing 12-month global speculative-grade default rate finished the first quarter of 2014 at 2.3%, down from 2.9% at the end of 2013, according to the agency's latest monthly default report.

Moody's said the first-quarter reading came in close to its forecast from a year ago of 2.5%.

In the United States, the speculative-grade default rate declined to 1.7% in the first quarter from 2.2% in the previous quarter. In Europe, the default rate fell to 2.7% from 4.4% during the same period.

Moody's said it now expects the global speculative-grade default rate to edge lower, to end 2014 at 2.2%.

By region, the comparable rates are expected to rise to 2.4% in the United States and fall to 1.4% in Europe.

"While we saw an increase in March, the pace of corporate defaults still remains slow," Moody's Albert Metz said in the report.

"With ample liquidity still available, we expect a moderate default rate in 2014."

A total of eight Moody's-rated corporate debt issuers have defaulted in 2014 to date, with seven of those coming in March. Moody's said 21 companies defaulted in the first quarter of 2013, with nine in March.

Of the eight defaults in the first quarter of this year, all but one were from the United States, Moody's reported. The only non-U.S. defaulter was Midwest Vanadium Pty Ltd.

By dollar volume, the global speculative-grade bond default rate ended the first quarter at 0.9%, down from 1.2% in the previous quarter.

In the United States, the dollar-weighted speculative-grade bond default rate ended the first quarter at 0.4%, the same as at the end of the fourth quarter of 2013. In Europe, the rate fell to 2.5% in the first quarter from 3.7% in the previous quarter.

Across industries, Moody's said it expects default rates to be highest in the consumer services sector in the United States and the media: advertising, printing and publishing sector in Europe in the next 12 months.

In the leveraged loan market, a total of four Moody's-rated companies defaulted on their loans in the first quarter of 2014, all from the United States and all recorded in March.

The U.S. leveraged loan default rate ended the first quarter at 1.4%, down from 2.2% in the previous quarter, Moody's said.

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