Defaults hit $157.3 billion in 2002, S&P says

New York, Dec. 17 - Defaults reached a record $157.3 billion in 2002, according to preliminary data for the year released by Standard & Poor's.

In total, 3.49% of all rated companies defaulted during the year, beating the previous high of 3.48% in 2001.

For junk-rated issuers, the global rate is 8.94% for 2002, the same as for 2001 and below the record high of 10.87% in 1991.

In the U.S., 7.09% of high-yield issuers defaulted, down from 9.72% in 2001.

For European Union countries, the rate rose to 12.77% in 2002 from 6.92% the previous year.

S&P noted that telecommunications was a major factor in the default rates. During 2002, 62.5% of all high-yield rated E.U. telecommunications companies defaulted - or five out of every eight - and 24.7% of their U.S. counterparts, or just under one in four.

"Although the 2002 annual default rates are almost identical to those of 2001 on a global basis, there are significant differences when one takes a closer look at different industries and geographic regions," said Brooks Brady, associate director for Standard & Poor's Risk Solutions, in a news release. "The U.S. and EU switched places this year compared with 2001."

S&P added that it expects default rates to slowly decline across all geographic regions during 2003 but sees default rates staying high in the telecommunication and media and entertainment sectors.

"The decline in default rates will not be as swift as the decline of the early 1990's because credit quality remains very poor and economic conditions continue to be weak," added Diane Vazza, managing director of Standard & Poor's Global Fixed Income Research, in the news release.

Of the $157.3 billion of total defaults, $123.6 billion was from the U.S. and $14.6 billion from the E.U.

The previous record amount was $117.4 billion, set in 2001. In that year $100.6 billion came from the U.S. and $2.7 billion from the E.U.

S&P noted that a small number of big defaults accounted for a major part of the 2002 volume including WorldCom Inc. and subsidiaries at $31.9 billion, Adelphia Communications Corp. and subsidiaries at $14.3 billion, NTL Inc. and subsidiaries at $10.8 billion, United Globalcom Inc. and subsidiaries at $6.7 billion, Global Crossing Ltd. and subsidiaries at $5.6 billion, McLeodUSA Inc. at on $4.6 billion and Williams Communications Group Inc. at $4.1 billion.

The year's 222 defaults included 120 from the U.S., 42 in Argentina, 12 in the U.K., 8 in Bermuda, 7 in Canada, 6 each in Brazil and the Netherlands, 5 each in Germany and Mexico, 2 each in Indonesia and Switzerland, and one each in Australia, Chile, China, Italy, Russia, Spain, and Uruguay.

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