Bond Defaults Set Another Record

January 31, 2002 ( - Treasurers, take note. There may be some good domestic economic news these days, but it's not from the credit world where bond defaults around the globe have yet to abate.

The latest example comes from Standard & Poor’s, which reported that 41 debt issuers defaulted on $31.3 billion of rated bonds in January, Reuters reported. Both figures set records for a single month – and included such high profile firms as Global Crossing and Kmart.

Not that the old records were all that old.  It was only a month ago that the latest record was established – with 27 issuers defaulted on $25.3 billion of bonds, S&P said. Among these was energy trader Enron Corp., which has since gone on to find itself immersed in a growing swirl of controversy since seeking bankruptcy protection in December.

The January data come on the heels of last year’s record-setting default totals. S&P said 211 companies defaulted last year on $115.4 billion of bonds.

Among the higher profile January defaults, according to S&P were:

  • Global Crossing Ltd., a Bermuda-based emerging telecommunications company with $7.6 billion of bonds
  • Kmart Corp., a Troy, Michigan-based discount retailer with $3.8 billion. Both sought bankruptcy protection.

Defaults have surged in the last two years as economies worldwide slowed and access to fresh capital grew tighter. S&P said defaults will likely peak by the end of June.

S&P said 18 of January’s defaulting companies came from the United States, including:

· McLeodUSA Inc., a telecom from Cedar Rapids, Iowa
· Polymer Group Inc., a North Charleston, South Carolina-based fabric maker
· United Globalcom Inc. a Denver media firm. 

Another 18 came from Argentina, following that country’s default on some of its own government debt, S&P said. The other five came from Bermuda as well as Australia, Britain, France and Poland.