S&P estimates show first drop in U.S. junk default rate since 2007

By Caroline Salls

Pittsburgh, Jan. 4 - Standard & Poor's expects the U.S. speculative-grade default rate to decline to an estimated 10.9% for the 12 months ended in December from 11.28% in November, which would mark the first monthly decline since October 2007, according to an S&P report.

S&P said credit conditions in the United States remain challenging, but signs of improvement are beginning to emerge, including improved lending conditions and resurgence in new issuance.

During December, four defaults were recorded by S&P, bringing the 2009 year-to-date total to 189.

The ratings agency said it expects the speculative-grade default rate to continue declining to a mean forecast of 6.9% by September 2010, but it could also decline to only 9.9% if economic conditions are worse than expected.

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