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Fallen angels boost defaults to $9.7 billion in October, Fitch says
New York, Nov. 20 - A surge in defaults by fallen angels boosted high-yield defaults to $9.7 billion in October, according to Fitch Ratings. The total so far this year has now passed $100 billion - and is nearly as much as the entire volume of defaults in the 20 years from 1980 to 1999.
On the surface, defaults appear to have taken a turn for the worse in October, with the $9.7 billion total much higher than $4.6 billion in September and $1 billion in August, Fitch noted.
But Fitch added that for the second time this year fallen angel defaults masked a relatively low default month for the remainder of the high yield market.
Of the month's total, $6.3 billion or 65% came from two fallen angels, AT&T Canada and NRG Energy.
Excluding these two, October saw just $3.4 billion in high yield defaults, the fourth consecutive month to produce "fairly low" defaults relative to the first half of the year, Fitch said.
The $57.3 billion of defaults in the first six months of 2002 were nearly all seasoned high yield credits, Fitch added. Only $1.1 billion of this figure were fallen angels. On average 18 issuers defaulted per month in the period.
For July through October, there have been $42.9 billion of defaults but $32.6 billion or 76% were fallen angels, with most of the total coming from WorldCom at $26 billion.
In addition, the pace of defaults excluding fallen angels has fallen to eight issuers per month.
Year to date through the end of October, defaults now total $100.2 billion.
Fitch pointed out that the defaults in just 10 months nearly equals the total volume from 1980 to 1999.
The trailing 12-month default rate is now 17.4% or 13.2% excluding fallen angels, Fitch added.
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