April 14 (Bloomberg) -- Leveraged buyouts may help push corporate defaults in Europe to a record 14.7 percent this year, according to Standard & Poor’s.

Between 90 and 112 speculative-grade companies in western Europe rated by S&P may default this year, the New York-based firm said in a report today, increasing an earlier estimate of as much as 11.1 percent. Defaults will be “materially higher” among companies purchased in LBOs, where target firms are loaded with acquisition debt, S&P said.

“We see the risk to currently vulnerable companies being that their lenders have neither the appetite nor the capacity to provide new financing to help them through the downturn,” S&P analysts led by Paul Watters in London wrote in the report. By late 2010 and 2011, “refinancing may be very difficult to arrange” for borrowers “unable to retire their debt by maturity,” they wrote.

The collapse of Lehman Brothers Holdings Inc. in the biggest-ever bankruptcy in September transformed a “cyclical downturn” into a global financial crisis, the analysts wrote. Indebted companies’ finances were thrown into disarray, prompting some to ask banks to relax conditions on loans.

Defaults in 2010 may be in the same range as this year, S&P estimates. Borrowers in industries that rely on consumer spending, such as non-food retail and automakers, will “remain under distinct pressure,” while commercial property may be “due a severe correction,” the report said.

‘Long-Term Issue’

The overall default rate last year was 4.5 percent, already more than three times higher than in 2007, according to S&P.

Refinancing LBOs that took place between 2005 and 2007 will remain a “long-term issue,” S&P said in the report. About 45 percent of LBO loans, amounting to 65.3 billion euros ($86 billion), are due to mature in 2013 and 2014, with another 47.4 billion euros due in 2015, S&P said.

S&P’s report is based on 141 companies with public speculative-grade ratings, as well as about 625 private so- called credit estimates, typically relating to companies bought in LBOs. Speculative-grade -- or high-risk, high-yield -- companies are those rated lower than BBB- by S&P.

The estimated peak in defaults isn’t directly comparable with the record 12 percent in the 2001 to 2003 economic slump because of the higher proportion in the current sample of credit estimates, S&P said.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

Last Updated: April 13, 2009 19:00 EDT