Leisure companies to push EU default rates-Moody's

By Elena Moya

LONDON, March 26 (Reuters) - European hotel, gaming and leisure companies struggling with the impact of the global credit crunch and an economic slowdown are expected to drive an increase in corporate default rates this year, credit ratings agency Moody's said in a report.

The rate of European speculative-grade default among bond and loan issuers is expected to rise to 3.9 percent this year, from 1.1 percent in 2007, Moody's said in a report on Wednesday. Defaults in the hotel, gaming and leisure industries are expected to reach 8.8 percent, more than in any other sector, the report said.

In the United States, the construction and building industries are expected to lead an increase in default rates to as much as 6.1 percent, the agency forecasts.

The numbers could go up if the U.S. economy entered into a recession, as that possibility has not been discounted at present, the report said.

Banks, hedge funds and other financial institutions' appetite for risk has kept default rates at historic lows over the past few years.

In 2007, only four European companies defaulted on their debt, including Britain's DIY chain Focus and German auto parts maker Schefenaker. It was the lowest number in almost a decade, the research showed.

The four defaults affected 0.6 billion euros ($934.7 million) of debt, far from the 59 billion euros of combined debt defaulted by 36 companies in 2002, the end of the Internet-boom years, the report shows.