Continued high default rate in 2010 predicted by S&P

Standard & Poor’s (S&P) expects between 55 and 75 West European companies with speculative-grade credit ratings to default in 2010, continuing an above-average default rate.

S&P said the default rate was likely to have peaked at 13.1% in the third quarter of 2009, commengin in its annual European corporate credit outlook. The defualt rate is likely to run at between 8.7% and 11.1% in 2010 — more than double the historic average of 4.5%.

"2009 was torture for many European companies and the screws will be loosened only partially in 2010. While the worst of the recession may be behind us and default rates may have peaked, the recovery is likely to be extremely shallow," said S&P chief credit officer for Europe Blaise Ganguin.

Challenges to corporate credit will be posed by weak capital spending prospects, continued high unemployment and housing market weaknesses, rising interest rates and taxes and a strengthening euro, said Ganguin.

Outlooks varied by sector. Ratings prospects should remain low for many industries in 2010, according to S&P's report. The telecoms, chemicals, hotels and gaming, energy, transport and consumer products sectors were at particular risk of default.

2009 was torture for many European companies and the screws will be loosened only partially in 2010.