Moody's warns of "severe default cycle"

In its quarterly 'Bottom Rung' list, published on March 6, the agency said there is "ample evidence of a severe default cycle. More than 23% of all US speculative-grade companies are on the list, compared with 9% two years ago." As recently as early 2007, there were only 158 companies on the list, it added.

In the last three months alone, 73 companies have joined the list and only 24 have left it - of which 17 have already defaulted. "Industries with broad exposure to weak consumer spending, such as media, autos, retail and gaming, are highly represented," Moody's commented.

To be on the list, companies must have a Caa1 or lower rating, or a B3 rating with a negative outlook or under review for downgrade. No financial companies appeared on the list.

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