Moody’s Investors Service Inc. foresees a sharp rise in corporate defaults as speculative-grade companies see their maturing debt levels soar during the next three years.

This debt is coming due in markets that may make it tough for many of these firms to retire their obligations. As such, Moody’s notes that, “refunding risk is now very high amid continuing turmoil in the credit markets, a general lack of market liquidity and weak economic conditions.”

The rating agency studied 478 rated issuers in the U.S., which have US$190 billion of debt coming due between 2009 and 2011. It reports that speculative-grade maturities are due to escalate over the next three years, from $26 billion that is coming due in 2009, to $44 billion in 2010, jumping to $120 billion in 2011.

“Refunding needs are at their highest level since the inception of this annual study 11 years ago,” says Moody’s vice president and senior credit officer Kevin Cassidy. “At the same time, refunding risk is magnified by a flight to quality among investors and banks’ cautious approach in lending to lower-rated speculative-grade companies.”

These issues and eroding liquidity at many companies will help drive the U.S. speculative-grade default rate to a peak of 16.4% by November 2009 from 4.4% at the end of 2008, Moody’s forecasts.