April 7 (Bloomberg) -- Thirty-five companies defaulted in March, the highest number in a single month since the Great Depression, according to Moody’s Investors Service.

The rate at which speculative-grade corporate borrowers worldwide failed to meet their obligations rose to 7 percent from 4.1 percent at the end of last year, Moody’s said in a report today. So far this year, 79 companies rated by Moody’s have defaulted, the New York-based ratings firm said.

Almost $1.3 trillion of losses and writedowns at financial institutions worldwide, combined with the deepest economic slowdown since World War II, have weakened companies’ finances, reducing their ability to pay debt. The global default rate will peak at 14.6 percent in the final quarter of this year, Moody’s predicted, lower than last month’s 15.3 percent forecast.

“There was a triangle of leverage between companies, banks and investors that was higher than at any time in history,” said Gary Jenkins, a strategist at Evolution Securities Ltd. in London. “It’s clear the default rate is going to be significant.”

In the U.S., the default rate at the end of the first quarter was 7.4 percent, up from 4.5 percent at the end of 2008, and in Europe it jumped to 4.8 percent from 2 percent.

European defaults are expected to peak at 21 percent in the fourth quarter, down from the 22.5 percent the ratings firm’s model calculated last month.

Defaults “will remain at an elevated rate,” the report said. The forecast for the peak rate has been reduced “in the last couple of months as high-yield bond spreads have declined moderately,” according to Moody’s.

In the leveraged loan market, 24 issuers rated by Moody’s defaulted in the first quarter of this year, all in North America, up from 11 a year earlier, according to the report. The rate was 4.5 percent, up from 3.5 percent at the end of the previous quarter and 1.5 percent a year ago, according to Moody’s.

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

Last Updated: April 7, 2009 12:11 EDT