Moody’s Investors Service reports that the global speculative-grade default rate has probably peaked, and that it ticked down in the fourth quarter.

The rating agency said that the default rate finished the year at 12.5%, down slightly from 12.6% in the previous quarter. The global default rate peaked in November at 12.9%, which surpassed 2001’s peak of 10.4% and 1991’s peak of 12.2%, Moody’s said. A year ago, the global default rate stood at just 4.2%.

The firm’s default rate forecasting model now predicts that the global speculative default rate will fall sharply over the next year to 3.3% by the end of the fourth quarter. The pace of the decline is expected to be more rapid in the first half of the year with the default rate falling to 6.4% by the end of June, it said.

“With the pace of defaults down sharply during the past several months, it is likely that the global default rate has now reached its cyclical peak for this credit cycle. If high yield credit spreads remain at or below current levels, we expect the default rate will fall sharply in 2010,” said Moody’s director of default research, Kenneth Emery.

“The main risk to this forecast is that the global economic recovery falters and companies lose their access to the high yield bond markets, which would result in a default rate that declines only modestly from current levels.” he added.

In all, a total of 32 Moody’s-rated corporate debt issuers defaulted in the fourth quarter, which sent the 2009 default count to a record high of 266. In comparison, there were 105 defaults recorded in 2008. In 2009, the media industry was the worst performer with 45 issuers defaulting. The automotive and hotel/gaming/leisure industries were next with 19 defaulters from each sector. In the coming year, default rates are expected to be highest in the consumer transportation sector in the U.S. and the business service sector in Europe.

By region, 77% of the 2009 defaulters were based in North America, and 11% were from Europe. The remaining defaulters were located in Asia and Latin America.

Measured on a dollar volume basis, the global speculative-grade bond default rate ended 2009 at 15.6%, down from a peak of 18.9% in November and 18.3% at the end of the third quarter. A year ago, the global dollar-weighted default rate was much lower at 5.9%.

Moody’s speculative-grade corporate distress index — which measures the percentage of rated issuers that have debt trading at distressed levels — came in at 18.8% at the end of the fourth quarter, down from 28.5% in the previous quarter. A year ago, the index stood at 54.1%.

IE