Default levels worst on record, says S&P

The first quarter of 2002 was the worst ever recorded for corporate defaults, said rating agency Standard & Poor’s (S&P).

Globally, 1.5% of companies, representing 94 bond issuers, defaulted on debt worth $33.6 billion – a new record. The majority of these - 41 issuers - were US-based firms.

Argentina, which formally defaulted on its sovereign debt in December, had 38 companies fail to honour debt obligations. But this represented just $2.3 billion in bonds.

“In the US, given the risks associated with the strength of the recovery, as well as the threat of rising energy prices due to Middle East tensions, we expect only a moderate deceleration in defaults during the rest of 2002,” said Diane Vazza, head of S&P’s global fixed-income research.

Vazza said defaults in the European Union are likely to continue to rise due to ongoing difficulties in the region’s telecommunications sector.

The UK registered three corporate defaults in the first quarter. Brazil, Canada, Bermuda and Indonesia had two each. China, Australia, Switzerland and the Netherlands registered one each.