US junk bond default rate rises to 2.25 pct in July

NEW YORK, Aug 1 (Reuters) - The U.S. junk bond default rate rose to 2.25 percent in July from 1.92 percent in June, as a credit crisis and sluggish economy pushed more companies into bankruptcy protection, according to data from Standard & Poor's released on Friday.

The default rate is likely to rise to 4.9 percent over the next year and could reach 8.5 percent if economic conditions are worse than expected, S&P said in its report.

Economic woes, a housing bust and high oil prices are taking a toll on U.S. companies and consumers, pushing bankruptcies and defaults higher.

Defaulting companies in July included IndyMac Bancorp Inc IDMC.PK, one of the largest U.S. mortgage lenders, and Pierre Foods Inc, which makes sandwiches for schools and convenience stores.

IndyMac filed for Chapter 7 bankruptcy protection after being seized by regulators, while soaring food costs sent Pierre Foods into Chapter 11 bankruptcy protection.

In all, seven U.S. borrowers defaulted last month, bringing the year-to-date total to 44, more than in all of 2006 and 2007 combined, S&P said.

In another sign of slumping credit quality, S&P said downgrades of U.S. corporate ratings have risen to 328 through July this year from 203 in the year-ago period. (Reporting by Dena Aubin; Editing by Jonathan Oatis)