Moody's global junk default rate slips to 1.6% for April after only one issuer default

By Caroline Salls

Pittsburgh, May 4 - Moody's Investors Service's global speculative-grade default rate edged to 1.6% for the 12 months ended April 30 from 1.7% the month before on the default of only a single Moody's-rated bond issuer, according to a report filed Thursday.

By dollar volume, the global speculative-grade default rate was unchanged at 4.2% from March to April, representing a 10% increase from its 3.8% level at the start of the year and a more than doubling of the 2.0% rate of a year ago.

"The 2.6% gap between April's issuer-weighted and dollar volume-weighted default rates highlights the divergent trends in default risk," Moody's David T. Hamilton said in the release.

"While the dollar-volume measured default rate suggests heightened credit risk, the issuer-based rate remains close to its lowest level in a decade."

On an issuer-basis, Moody's said the historical average global speculative-grade rate is 5.1%, far higher than current levels.

The ratings service's default-rate forecasting model for its issuer-weighted global speculative-grade default rate predicted that the global speculative-grade default rate will rise to 3% by the end of April.

Year to date, four bond issuers have defaulted on a total of $2.2 billion in bonds, according to Moody's, and all the defaulters have been U.S.-based companies.

In April, the single Moody's-rated bond defaulter was Dana Credit Corp., with $275 million in bonds.

The largest defaulter so far in 2006 continued to be Dana Corp., which defaulted on $1.6 billion.

April was the 14th consecutive month during which no Moody's-rated European issuer has defaulted, keeping the European speculative-grade default rate at zero, as it had been in March.

The European rate was 1.1% at the start of the year and 1.7% in April 2005.

The dollar volume-weighted speculative-grade default rate in Europe also stood at zero from March to April and is down from 0.4% at the beginning of 2006 and from 1.3% in April 2005.

The U.S. speculative-grade default rate in April recorded a small decline similar to the global rate, slipping to 2.2% from 2.3% for March.

In the first four months in 2006, Moody's said the U.S. speculative-grade default rate has registered only a 4% reduction from its 2.4% level at the start of the year.

A year ago, the U.S. speculative-grade default rate stood at 2.5%.

As a percentage of dollar volume, the U.S. speculative-grade default rate stayed at the same 4.7% from March to April. In April 2005, the U.S. speculative-grade default rate, by dollar volume, was at 2.1%.

There were no Moody's-rated defaults in the leveraged loan market in April.

The rolling 12-month issuer-weighted loan default rate fell to 1.5% in April, down from 1.9% in March. In April 2005, the loan default rate stood at 2.0%.

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