Global defaults stay below average for 40th month

LONDON, June 15 (Reuters) - Global debt default rates have stayed below the historic average for the 40th consecutive month because of ample liquidity in the financial markets, credit rating agency Standard & Poor's says.

Only two corporate defaults were recorded in May, U.S. based Insight Health Services Corp. and North Atlantic Holding Company Inc., S&P said in a report published on Friday.

The two defaults bring the year-to-date total to 10, affecting rated debt worth about $2 billion, the agency said.

The 12-month global corporate speculative-grade bond default rate fell to 1.2 percent in May, from 1.25 percent in April, well below its long-term average of 4.48 percent, S&P said.

"Distress and defaults continue to be suppressed by abundant liquidity and generous financing provisions," the report said.

But rising interest rates and increasing corporate debt levels are expected to lift U.S. speculative-grade default rates to 2.3 percent by the end of this year and 2.5 percent by the first quarter of 2008, S&P said.

Investment banks around the world, including Goldman Sachs Group Inc. and Morgan Stanley, have hired restructuring professionals over the past few months as they expect a new wave of corporate restructurings soon.

Most of this talent, however, is now employed in other tasks, such as mergers and acquisitions or fund raising, bankers and lawyers have said.