Eurozone crisis will cause more company defults, warns S&P

It would equate to defaults by 41 of the 676 speculative grade European companies rated by S&P, and would compare with a 4.8pc default rate in 2011.

The agency said the companies most at risk would be those with the greatest exposure to the most troubled eurozone countries, while those with a focus elsewhere would fare better.

"We believe that companies that sell goods and services globally should be better insulated from the turbulence engulfing the eurozone, irrespective of industry-specific cycles that usually prevail over credit developments, because they'll be able to rely on continued relatively strong growth in emerging markets and other commodity-producing countries," said Paul Watters, head of corporate research at S&P's Ratings Services.

"Nonetheless, country risks will likely weigh on the credit fortunes of more domestic-oriented European companies, especially those with significant exposure to economies that are hardest hit by the sovereign debt crisis," he said.

The default rates projected by the rating agency for 2012 are still well below the peak level of 14.7pc in Europe in the third quarter of 2009.

S&P said that if the eurozone situation panned out worse than it was currently forecasting, with a deeper or more protracted recession and a deteriorating financing environment, the default rate could rise to 8.4pc or higher.

S&P is forecasting a mild recession in the eurozone in the first half of the year with a 40pc chance of a deeper recession materialising. It said that growth in the region is likely to reach just 0.4pc this year, with monetary policy likely to remain "unconventional and highly stimulative" until 2013 at least.

"We believe the default rate over the past two years was artificially depressed by the accommodating behaviour of senior lenders more interested in minimising book losses while at the same time capitalising on amendment fees and higher spreads, but there are signs that the phoney war of forbearance may finally be coming to an end," Mr Watters said.

"The policy of temporary relief by senior lenders for borrowers in distress is reaching its limits, given the proximity to principal maturity dates in 2013-2014 and the pressure on banks to improve the quality of assets on their balance sheets."

The Telegraph