(Reuters) - Around 40% of U.S. companies that defaulted on their debt obligations in 2023 had previously done so, according to a new report from credit ratings agency Moody's.

These and other companies with a high level of debt struggled through an elevated interest rate and inflationary environment, said the report, which was released on Tuesday.

Companies acquired by private equity firms through leveraged buyouts made up a majority of this number, the report added. Most private equity-owned defaults took the form of distressed exchanges, whereby borrowers worked with lenders and investors to restructure their debt.

At the same time, however, Moody's found that the number of distressed debt issuers dipped to 227 in the first quarter of 2024 from 238 in the fourth quarter of 2023.

"The List's decline signals that the default rate will gradually ease in the year ahead, as fewer distressed debt issuers remain," the report's authors said.

Ratings of some higher-rated speculative-grade debt issuers were upgraded in the first quarter, after they were able to refinance debt with upcoming maturities as willing investors returned to the market.

The speculative-grade default rate peaked at around 5.8% in the first quarter, Moody's wrote. The firm expects the default rate to stabilize around its historical average of 4.7% by June and dip down to 3.4% by April next year.