By Juan Lagorio
NEW YORK, Jan 6 (Reuters) - Moody's Corp (MCO.N), the parent of credit rating agency Moody's Investors Service, on Tuesday forecast a "severe recession" in 2009, with high-yield corporate default rates climbing to between 10 and 12 percent.
"The conditions that we experienced in 2008 at a GDP level are going to be increasingly challenging in 2009," Raymond McDaniel, chairman and chief executive of Moody's Corp, said at Citi's Global Entertainment, Media and Telecommunications conference.
"We have in most areas of the world a declining GDP growth with China being the exception, but even the Chinese rate of GDP growth decelerating from what it was in 2008," he added.
Moody's estimated the U.S. economy will shrink 1.5 percent in 2009, while the European Union will fall 0.6 percent and Japan's economy will contract 0.5 percent, pressured by weak consumer activity.
The worst financial crisis in decades began with fallout from the U.S. subprime mortgage market that catered to risky borrowers and then expanded around the world, wiping out banks and forcing governments to pump trillions of dollars into financial systems to prevent a recession from turning into a depression.
Victims of the crisis are still piling up, with announcements almost daily of fresh company losses, more layoffs, and slumping prices for assets from cars to homes.
Critics, including politicians and regulators, accuse credit rating agencies Moody's, Standard & Poor's and Fitch Ratings of failing to be objective in assigning ratings to mortgage and other complex debt.
Standard & Poor's is owned by McGraw-Hill Cos (MHP.N), while Fitch is part of France's Fimalac SA (LBCP.PA).
Some believe that agencies assigned high ratings to win business from the issuers that pay for the ratings.
Moody's, which generates half of its revenues in the United States and 70 percent of its sales from rating services, has been hammered as demand for new bond ratings plunged with the credit crunch.
McDaniel said the markets for subprime mortgage-backed securities, asset-backed securities, and collateralized debt obligations were gone, while the future of the asset-backed commercial paper market was in doubt.
However, some consumer and commercial asset-backed markets could resume their activities, he said, after what he called a "very rough cycle."
"I don't expect a significant resumption in securitization in 2009," McDaniel said.
McDaniel said the visibility of the business remained "very limited," but added he saw opportunities this year on the need of companies to refinance their debt.
"Refinancing needs are going to be pushing activity in the markets" in 2009, he said. (Editing by Leslie Adler)
