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Investing August 14, 2001
July Junk Defaults Jump, Set Record
August 14, 2001 (PLANSPONSOR.com) - Junk bonds lived
up to their name in July, with the default rate rising to
8.29% - the highest level since February 1992.
Reported by Nevin E. Adams
According to Moody’s Investors Service, the 12-month junk bond default rate rose from a revised 7.85% in June, as eighteen issuers defaulted on $7.7 billion in debt. That pushed the total defaults in 2001 to $61.8 billion, according to the rating agency. That is already well above last year?s record default volume of $49.1 billion.
For US issuers, the junk bond default rate rose to 8.82% in July from 8.22% the month before. Moody’s expects defaults to peak at 10.1% in February and to begin falling by April.
The record global default rate is 13.1% – set in July 1991.
Credit rating agency Fitch noted that 15 companies defaulted on 40 bond issues totaling $6 billion, lifting year-to-date defaults to $51.6 billion. Year-to-date, 8.8% of the junk bonds Fitch tracks have gone into default, while the 12-month default rate is now 10.7%, according to Reuters.
The biggest default last month was $2.8 billion by information technology firm Comdisco.
Junk bonds carry ratings of “BB-plus’ or lower from Fitch and Standard & Poor’s, and “Ba1′ or lower from Moody’s Investors Service.