Defaults Surge on Corporate Bonds

January 14, 2002 ( - Investors should remember that fixed income isn't risk free - in fact, last year the number of corporate defaults was at its highest, according to Standard & Poor's.

The rating agency reported that 211 companies worldwide defaulted on $115.4 billion of debt – both numbers breaking records that were set the previous year, when 132 issuers defaulted on $42.3 billion of debt.

Of those, 132 came from the US, including:

  • troubled energy trader Enron Corp.
  • California utility Pacific Gas & Electric Co.
  • Southern California Edison.

The default rate for speculative-grade, or junk-rated, issuers rose to 8.57% in 2001, from 5.68% the previous year, the highest since the 10.87% record set in 1991, according to S&P

About 4% of all issuers defaulted in 2001, matching the record set in 1991.