Corporate Defaults Climb To 32 So Far In 2009
Corporate defaults continue to rise rapidly in 2009. Through February 17, 2009, 31 defaults, affecting debt worth $49bn, have been recorded, saidworld leading rating agency Standard and Poor's in an article published on 20 February. The latestdefault is Castle HoldCo 4 (Countrywide), the holding company for UK-based real estate services provider Countrywide PLC, which defaulted as a result of a missed coupon payment.
This number is one-fourth of the 125 defaults recorded in all of 2008 (affecting debt worth $429bn) and more than triple the number during the same period in 2008, according to the article, titled "Global Bond Markets' Weakest Links And Monthly Default Rates (Premium)."
"The continued rise in defaults is in sharp contrast with trends in prior years, when only 22 defaults were recorded in all of 2007 and 30 in 2006," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
Of the 32 defaults in 2009, 23 are from the US,six are from emerging markets, two are from Canada, and one is from France. The US also leads in the number of weakest links, with 205 of the 265 entities, or 77%. (Weakest links are defined as issuers rated 'B-' or lower with either a negative outlook or with ratings on CreditWatch with negative implications, and they are at greater risk of default.)
"The number of global weakest links continues to increase sharply as eroding credit quality leads to lower ratings and more entities with negative outlooks or with ratings on CreditWatch negative," said Ms. Vazza. As of February 16, 2009, weakest links increased for the 12th consecutive month to 265, with combined rated debt worth $485.74bn.
"Castle HoldCo 4 is the second default this year from the real estate company sector, both of which were non-US-based real estate companies, illustrative of the toll real estate issues have taken outside of the US after a number of real estate defaults occurred in the U.S. in 2008," said Ms Vazza.
