Moody’s: Global speculative-grade default rate up 2.3% in 1Q

Moody’s trailing 12-month global speculative-grade default rate rose to 2.3% at the end of March 2012, up from 1.8% at the end of 2011, said Moody’s Investors Service in its monthly default report.

A year ago, the rate was 2.6%. A total of 20 Moody’s-rated corporate debt issuers have defaulted so far this year, eleven of which defaulted in March.

In the US, the speculative-grade default rate ended the first quarter at 2.8%, up from 1.9% in the previous quarter, while in Europe the comparable rate edged lower to 2.3% from 3.0%. At this time last year, the US rate was 2.9% and the European default rate was 2.6%.

Based on its forecasting model, Moody’s expects the global speculative-grade default rate to rise to 3.0% by the end of 2012. Moody’s expects default rates to be highest in the Media: Advertising, Printing & Publishing sector in the US and the Energy: Oil & Gas sector in Europe.

“March saw a jump in the number of defaults, but it remains to be seen whether this is a trend,” said Albert Metz, Managing Director of Credit Policy Research. “Quite a few of the defaults were related to the same corporate family, or represented the second defaults from issuers which had previously defaulted in the last couple of years.”

By dollar volume the global speculative-grade bond default rate closed at 1.7% in the first quarter, down slightly from 1.8% the previous quarter. Last year, the global dollar-weighted default rate stood at 1.6%.

In the US, the dollar-weighted speculative-grade bond default rate ended the first quarter at 1.5%. The comparable rate was 1.1% in the previous quarter and 1.5% a year ago.

In Europe, the dollar-weighted speculative-grade bond default rate fell to 2.3% in the first quarter of 2012, from 4.3% in the last quarter of 2011. This drop was primarily driven by Allied Irish Bank’s move out of the trailing twelve month window. At this time last year, the European speculative-grade bond default rate was 2.0%.

Moody’s distressed index declined to 17.2% at the end of the first quarter, down from 24.1% in the previous quarter. A year ago, the index was lower at 7.7%. The distressed index is a measure of the percentage of high-yield issuers that have debt trading at distressed levels.

The trailing 12 month US leveraged loan default rate ended the first quarter at 2.1%, up from 0.6% in the prior quarter. A year ago, the loan default rate was 1.7%. A total of ten Moody’s-rated loan issuers defaulted so far this year, all from the US. Last year, only one issuer defaulted in the first quarter.