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Announcement:

Moody's: Global default rate ends first quarter at 2.6%

Global Credit Research - 08 Apr 2011

New York, April 08, 2011 -- The trailing 12-month global speculative-grade default rate finished the first quarter of 2011 at 2.6%, down from 3.2% at the end of 2010 and consistent with Moody's year-ago forecast of 2.4%, according to Moody's Investors Service in its latest default report. A year ago, the global default rate stood at 10.0%.

There were four defaults among Moody's-rated corporate debt issuers in March, bringing the total in 2011 to eight, year to date. In the first quarter of 2010, 17 companies defaulted.

Moody's forecasting model predicts that the global speculative-grade default rate will fall to 1.5% in December 2011 and edge higher to 1.6% in March 2012.

"Our expectation is that even with a sluggish economic recovery for the next year, corporate default rates will remain low," said Albert Metz, Managing Director of Credit Policy Research.

In the U.S., the speculative-grade default rate ended the first quarter at 2.9%, down from 3.4% at the end of 2010. A year ago, the default rate in the U.S. stood at 11.0%.

For U.S. speculative-grade issuers, Moody's forecasting model foresees the default rate declining to 1.8% a year from now.

In Europe, the default rate edged lower in the first quarter to 2.2%, from 2.3% the previous quarter. It was 7.0% a year ago.

In Europe, Moody's anticipates the rate declining to 1.3% in a year.

Moody's notes that the current 2.6% global speculative-grade default rate is consistent with Moody's forecast of 2.4% made a year ago. The default rate met forecasts on a regional basis as well, with Moody's having forecast a US rate of 2.7% and a European rate of 1.8% one year ago.

Over the coming year, Moody's expects the default rate to be highest in the Hotel Gaming, & Leisure sector in the U.S. and in the Media: Advertising, Printing & Publishing sector in Europe.

When measured on a dollar volume basis, the global speculative-grade bond default rate closed the first quarter at 1.6%, down slightly from the 1.7% level from the previous quarter. Last year, the global dollar-weighted default rate was much higher at 10.6%.

In the U.S., the dollar-weighted speculative-grade bond default rate ended the first quarter at 1.5%, down from 1.6% in the prior quarter and 11.8% a year ago.

In Europe, the dollar-weighted speculative-grade bond default rate edged higher in the first quarter, creeping up to 2.0% from 1.9% the previous quarter. A year ago, the European speculative-grade bond default rate was at 5.8%.

Also in the first quarter, Moody's distressed index fell to 7.7%, down from 10.5% in the previous quarter. A year ago, the index was much higher at 17.1%.

In the leveraged loan market, there was only one default of Moody's-rated issuer in the first quarter. Last year in the first quarter, 11 loan issuers defaulted. The trailing 12- month U.S. leveraged loan default rate ended the first quarter at 1.7%, down from 2.8% from last quarter and from 10.5% a year ago.

New York
Sharon Ou
Asst Vice President - Analyst
Credit Policy Research
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Albert Metz
MD - Credit Policy Research
Credit Policy Research
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: Global default rate ends first quarter at 2.6%
No Related Data.
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