CORRECTED - Weakest US firms face $700 bln debt overhang-S&P

(Corrects GMAC company name in second paragraph)

NEW YORK Aug 13 (Reuters) - U.S. companies with the lowest junk ratings have nearly $700 billion of debt coming due by 2014, and a sluggish economy will keep the risk of defaults high, Standard & Poor's said on Thursday.

Media and entertainment companies have the heaviest burden of low-rated debt, or $140 billion coming due through 2014, while finance companies have about $117 billion, S&P said in a report. About $52 billion of the financial debt belongs to auto finance companies Ford Motor Credit Co and GMAC Inc, according to S&P.

"As the economic downturn gets into full swing, prospects for a quick recovery appear a slim hope at best," S&P managing director Diane Vazza said in the report. Real U.S. gross domestic product is expected to decline 3 percent this year and consumer spending about 1 percent, the report said.

Junk bond default rates have already surged to 9.25 percent from a low of 0.97 percent at the end of 2007 and are expected to rise to 13.9 percent by June 2010.

"Under such a harsh economic and financial backdrop, lending conditions are particularly difficult for the weakest borrowers," Vazza said.

S&P's report looked at refinancing needs of companies that have ratings of B-minus or below and a deteriorating credit outlook, or companies with bonds trading at distressed levels. Bonds are considered distressed when they yield at least 1,000 basis points more than Treasuries.

About 74 percent of junk-rated debt coming due over the next five years is rated in the B and lower categories, Vazza said.

While the junk bond market has reopened, allowing many companies to refinance debt, borrowing conditions are still difficult for the weakest companies. Only 16 percent of new high-yield issuance in the second quarter came from issuers in the B-minus and lower rating ranges, S&P said.