U.S. high-yield defaults rise to 6.86% for year to February, S&P says

New York, March 10 - The U.S. high-yield default rate rose to 6.86% in the 12 months to February, up from 6.49% in the 12 months to January, Standard & Poor's said Monday.

But the rating agency said the figure remains much improved, having fallen from its high of 10.20% in April 2002.

S&P continues to forecast U.S. high-yield defaults will decline further.

Meanwhile European high-yield defaults declined slightly to 12.33% from 13.01% in January.

The global high-yield default rate is 8.20%.

As far as the U.S. is concerned, S&P noted that industrial production, which it describes as a good leading indicator of defaults, has been "steadily moving into positive territory since January 2002, suggesting that a further decline in defaults is likely."

Projections for this year indicate continued weak growth in industrial production until the fourth quarter.

"However, issuers are faced with an environment where banks are tightening lending standards, albeit to a lesser extent than in 2001," S&P cautioned. "This potentially jeopardizes an important source of funding for issuers nearing default that may be unable to turn to the capital markets."

The global investment-grade default rate for the 12 months to February was 0.40%.

S&P noted that as of March 7 a total of 57 issuers with $39 billion in rated bonds fell into its "weakest links" category - which is made up of issuers with ratings of CCC or lower and either on CreditWatch with negative implications or with a negative outlook. The total number of issuers is down from 60 a month earlier but the dollar value of bonds is up $4 billion.

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