Moody's global junk default rate remains unchanged at 2.8% in February

By Caroline Salls

Pittsburgh, March 8 - Moody's Investors Service's trailing 12-month global speculative-grade default rate remained unchanged at 2.8% in February, according to its monthly default report.

Moody's said this rate corresponds closely to its forecast made in February 2010. At that time, Moody's global default rate stood much higher at 11.7%.

In the United States, the speculative-grade default rate for February was 3.0%, also unchanged from its January level. At this time last year, the U.S. default rate was 12.8%.

In Europe, the speculative grade default rate edged lower to 2.2% during February from 2.3% in January.

Moody's said this small decline stemmed from a minor technical change in the rating universe rather than to a drop in default counts. The European default rate was 9.4% in February 2010.

The ratings agency said the first debt defaults of 2011 were recorded in February, as U.S. companies Guitar Center and Coach America restructured though distressed exchanges.

Also last month, Danish bank Amagerbanken was taken into conservatorship by its regulator, with its uninsured depositors and general creditors expected to suffer losses.

Since Moody's only rates bank debt guaranteed by the government and did not default, the agency said this credit event is not formally recognized in its monthly default report, which focuses on rated loan and bond defaults.

Moody's said it predicts that the global speculative-grade default rate will decline to 1.4% in December 2011 and be at 1.6% in February 2012.

By region, Moody's said it expects the default rate to decline to 1.6% by the end of 2011 among U.S. issuers and 1.0% among European issuers.

"We continue to expect defaults to remain low throughout the year, even given current uncertainties with respect to the strength of the economic recovery in general and the price of oil in particular," Moody's Albert Metz said in the report.

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

When measured on a dollar volume basis, the global speculative-grade bond default rate remained unchanged at 1.6% from January to February. A year ago, the global dollar-weighted default rate stood at 15.2% in February.

In the United States, the dollar-weighted speculative-grade bond default rate also remained unchanged from January to February at 1.5%. This rate was 15.9% in February 2010.

Meanwhile, the European dollar-weighted speculative-grade bond default rate edged higher to 2% in February from 1.9% in January. A year ago, the European speculative-grade bond default rate was 10.3%.

In the leveraged loan market, Coach America was the only Moody's-rated default in February.

The trailing 12-month U.S. leveraged loan default rate came in at 2.5% in February, unchanged from January. A year ago, the loan default rate was 11.0%.

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