New debt issuance at 17-year low in 3rd qtr -S&P

NEW YORK, Oct 28 (Reuters) - The pace of growth in new debt issuance fell to a 17-year low in the third quarter as credit spreads remained elevated and volatile and banks were reluctant to lend, Standard & Poor's said on Tuesday.

S&P rated just 53 new issuers in the quarter, the lowest number since 1991. Just 127 new issuers have been rated in 2008 so far, compared with 365 issuers rated for all of 2007.

The recent entrants are mostly speculative, or "junk" grade, with 53 of the 127 rated "B", or five notches into junk grade.

In 2007, 301 of the new entrants were junk, with 247 of those rated "B."

"With speculative-grade financing costs extremely high and economic conditions weak, we expect the flow of new high-yield entrants to remain limited in the next few quarters," said S&P analyst Diane Vazza.

The recent growth in the junk sector comes mostly from companies in the leisure and media sector, followed by energy and natural resources and consumer and services, said Vazza.

The majority of new investment-grade ratings went to financial or insurance firms.

At end September, junk-rated issuers accounted for 49.7 percent of the total rated companies in the United States, down from 51.2 percent at end 2007.

Nonfinancial firms account for the majority of those at 62.3 percent, 52 percent of whom are rated below "BB-minus," or three notches into junk status. (Reporting by Ciara Linnane; Editing by Leslie Adler)