HY bonds see rising defaults

17 percent of all high-yield bonds weretrading at distressed levels, up from 11 percent in January andthe highest since June 2003, according to Standard & Poor's.Media and entertainment companies accounted for more than one-third of the $104 billion in such debt. High-yield media bondshave lost about 10 percent this year, more than double thedecline of the average junk issue, Merrill Lynch & Co. indexdata show. Cary, North Carolina-based R.H. Donnelley and Idearc, ofDallas, performed the worst among the 50 top high-yield issuersin February, Merrill data show. The last recession was in 2001. Speculative-grade mediadebt gained 9.3 percent in 2000, 12 percent in 2001 and 7.5percent in 2002 while junk bonds on average lost value in 2000and 2002, returning 4.5 percent in 2001. Junk debt is ratedbelow Baa3 by Moody's Investors Service and BBB- by Standard &Poor's, owned by New York-based McGraw-Hill Cos. Junk-bond default rates may more than quadruple to 4.6percent this year from 1.09 percent in January, Diane Vazza,global head of fixed-income research at S&P in New York,predicted in February.