>>Debt defaults set record
15jan02
A RECORD number of companies defaulted on their debt in 2001 around the world, and the number could be
even greater in 2002, the credit rating firm Standard and Poor's said.
Corporate defaults exceeded 200 for the first time, with 211 firms defaulting on some $US115.4 billion ($223.34
billion) of debt last year, S&P said today.
A total of 162 defaults took place in the United States last year, while Argentina had 15; Canada, nine; Britain,
five; Australia, four; Poland, three; and Mexico, two.
One default each took place in Bermuda, Germany, Greece, Indonesia, South Korea, the Netherlands, Norway,
the Philippines, Russia, Thailand, and Venezuela.
The previous record was set in 2000, when 132 issuers defaulted on $US42.3 billion of debt.
S and P said 3.99 per cent of all corporate bond issuers defaulted during 2001, near the record of 4.01 per cent
set in 1991, and far surpassing 2000's global default rate of 2.56 per cent.
Additionally, among firms with poor "speculative grade" credit ratings, 8.57 per cent defaulted during the year,
the highest default rate since the level of 10.87 per cent set in 1991.
S and P said the worst may not yet be over for companies defaulting on their debt.
"In a typical cycle, defaults peak six months after an economic bottom," said S and P analyst Diane Vazza.
"Standard and Poor's believes the US economy will bottom in the first quarter of this year and then improve
gradually. We would expect to see continued high default rates, with defaults peaking at the beginning of the
(northern) summer, when speculative-grade default rates could reach 11 per cent, and then trailing off at year
end."
The defaults were concentrated in the telecom sector, which accounted for 18.5 per cent of all defaults. But S and
P analyst Brooks Brady said that "telecom defaults began to ease at the end of last year, with only six reported in
the fourth quarter".
"In 2002, we expect defaults to be more broad-based than they were in 2001," said Vazza, "although we'll see
some concentrated weakness in certain areas of consumer products and retail."
In Argentina, 10 banks defaulted due to government-imposed limits on bank account withdrawals.
"In 2002, the risk of additional defaults in Argentina will remain high as the economic turmoil runs its course," said
Brady.<<
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