UPDATE 1-Junk default rate rises to 11.5% in August-Moody's

LONDON, Sept 9 - Moody's Investors Service said the global speculative-grade default rate rose to 11.5 percent in August, the highest level since 1991, as the economic recession took hold.

A total of 15 Moody's-rated corporate debt issuers defaulted last month, 11 of them in North America and four in Europe, taking the year-to-date total to 205 companies, Moody's said in a report on Wednesday.

The ratings agency, meanwhile, cut its forecast for Europe's peak junk default rate, while raising its forecasts for peak U.S. and global rates.

Moody's now expects the European rate to peak at 11.4 percent in the fourth quarter -- the sixth consecutive month that it has reduced its estimate from 12 percent in August, 15 percent in July and as high as 22.5 percent in March.

For the United States, Moody's raised its peak rate forecast to 13.2 percent in the fourth quarter, versus last month's estimate of 12.7 percent, reversing direction after reducing the estimate for at least the previous four months.

Moody's predicted that the global junk default rate would peak at 12.6 percent in the fourth quarter and decline sharply to 4.3 percent by August 2010.

That compares with a 1991 peak of 12.2 percent.

The global forecast is based on an estimated peak in the U.S. unemployment rate at 10 percent in 2010, said Kenneth Emery, director of corporate default research.

"If the U.S. unemployment rate were to increase substantially above 10 percent in the coming year, then default rates would likely be significantly higher," he added.

Moody's previously said its peak default forecasts for Europe had fallen due to the reopening of the high-yield bond market and the narrowing of bond spreads, which helped ease financial pressures on companies.

In August, Europe's default rate rose to 8.2 percent from 6.7 percent the previous month, while the U.S. rate rose to 12.2 percent from a revised level of 11.9 percent.

The Moody's distressed index, which measures the percentage of rated issuers that have debt trading at distressed levels, fell to 30.1 percent in August from July's revised level of 34.4 percent. A year ago, the index was at 20.4 percent.

In the leveraged loan market, a total of five Moody's-rated borrowers defaulted in August, all of them North American, the agency said.