Moody's reports seven first-quarter U.S. corporate family defaults

By Caroline Salls

Pittsburgh, April 15 - Moody's Investors Service said there were seven U.S. non-financial corporate family defaults in the first quarter, representing more than $3 billion of debt, according to a report released Tuesday.

The first-quarter figures compare to nine defaults, totaling $7 billion in debt, for the same period of last year.

As previously reported, Moody's U.S. speculative-grade default rate finished the first quarter at 1.7%, down from 2.2% at the end of 2013 and its lowest level since February 2008.

"Issuer-friendly credit markets, characterized by low interest rates and covenant-lite structures, have contributed to the low default count," Moody's Lenny Ajzenman said in the release.

"Even low-rated companies, or those with corporate family ratings of B3 and Caa1, continue to be able to refinance upcoming debt maturities and boost liquidity."

Among low-rated companies that refinanced during the quarter were Walter Energy Inc., Lonestar Resources America Inc. and BioScrip, Inc.

Moody's said the largest default in the first quarter was the bankruptcy of Sorenson Communications, Inc., which defaulted on more than $1.3 billion of debt.

In all, the ratings agency said there were five bankruptcies and two distressed exchanges in the first three months of the year. The distressed exchanges were both debt-to-equity conversions, undertaken by YRC Worldwide Inc. (B3 stable) and Travelport LLC (Caa1 stable).

According to the release, Moody's-rated U.S. speculative-grade companies have overall good liquidity, supporting the rating agency's low default forecast of 2.4% by year-end,

Defaults spanned numerous sectors during the first quarter, including technology, energy and restaurants, Moody's reported. Consumer services have the highest one-year default rate forecast, followed by business services and retail.

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