European high-yield credit quality worsened again in first quarter, Moody's says

New York, April 10 - Credit quality in the European high-yield market worsened again in the first quarter, according to Moody's Investors Service.

During the three months, there were 21 downgrades and just three upgrades, Moody's said.

The rating agency also noted that about half the downgrades were to telecommunications and cable issuers.

"An ongoing deterioration in the creditworthiness of Europe's speculative-grade sector has prohibited any significant narrowing in high-yield spreads so far this year," said Moody's economic Kerryn Fowlie in a report, although she noted the Goldman Sachs euro high yield index currently shows a spread of 1,341 basis points, better than 1,400 basis points during the fourth quarter of last year.

Fowlie added that due in part to the consistent underperformance of telecoms European high yield spreads are more than 500 basis points wider than the comparable U.S. figure "suggesting that Europe's lowest-rated issuers continue to encounter difficulties accessing capital markets."

The first-quarter figures for U.S. high-yield issuers were 90 downgrades affecting $67 billion of debt and 24 upgrades affecting $17 billion. There were 18 fallen angels in the quarter with $15 billion of debt and only two rising stars with $2.6 billion.

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