U.S. high yield default rate drops to 6.2% in October after $1 billion defaults in month, Fitch says

New York, Nov. 25 - The U.S. high yield default rate dropped to 6.2% for the 12 months ending October after that month saw just $1 billion of defaults, the lowest figure so far this year, according to Fitch Ratings.

The number of companies defaulting fell to six in October from 10 in September, Fitch added.

So far this year there have been $31.4 billion of defaults from 90 issuers.

The 6.2% trailing 12 month default rate in October was down from 7.4% in September. During 2003 the figure has consistently declined after ending 2002 at a record 16.4%, Fitch added.

"Default risk in the high yield segment has been greatly alleviated this year by the strong funding environment," Fitch commented.

"The slow yet steady improvement in key economic indicators, combined with fewer defaults and downgrades, has certainly boosted lender and investor confidence, and has allowed companies at the low end of the rating scale to extend debt maturities, lower interest costs, and overall boost liquidity."

Fitch's default index is based on the U.S., dollar denominated, non-convertible, speculative-grade bond market (the rating equivalent of BB+ and below, rated by Fitch or one of the two other major rating agencies). Fitch includes rated and non-rated, public bonds and private placements with Rule 144A registration rights. Defaults include missed coupon or principal payments, bankruptcy or distressed exchanges.

Default rates are calculated by dividing the volume of defaulted debt by the average principal volume outstanding for the period under observation.

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