Global junk defaults fall to 1.69% in February, S&P says

New York, March 3 - The global speculative-grade default rate declined to 1.69% for the 12 months ended in February from 1.71% in January, according to Standard & Poor's.

Thanks to expectations for economic stability, relatively favorable financing conditions and healthy corporate profitability, the rating agency sees defaults remaining low. It anticipates they will decline to a trough before the end of the year after which the rate is predicted to rise slowly.

For the last 15 months, the rate has been below the long-term average of 4.91% for the period 1981 to 2004 although it is still higher than the record low of 1.3% in the second quarter of 1997.

By region the February default rate was 2.31% in the United States, 0% in Europe and 0.47% for emerging markets.

Nonetheless, S&P said it is still concerned that there will be a bigger increase in defaults in 2006 and after due to the high proportion of low rated issuance. For February, 48% of new bonds were counted as low rated by S&P compared to 43% for 2004 and 31% for 2003.

S&P's weakest links list of issuers vulnerable to default had 20 issuers with $6 billion of debt as of March 3, three issuers lower than a month earlier. Companies qualify for the list if they are rated CCC or lower and have a negative outlook or are on CreditWatch negative.

So far in 2005 there have been three defaults affecting $2.3 billion of rated debt. The issuers are Inland Fiber Group LLC, the Dominican Republic and Tower Automotive Inc.

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