NEW YORK – Last year was the worst ever for corporate debt failures, as 211 companies worldwide defaulted on $115.4 billion of debt, credit rating agency Standard & Poor's said on Monday.
Both the number of defaults and the dollar amounts are records. The old records were set in 2000, when 132 issuers defaulted on $42.3 billion of debt, S&P said.
S&P said 162 of the defaulting issuers came from the United States, including bankrupt energy trader Enron Corp., California utilities Pacific Gas & Electric Co., and Southern California Edison, and a flurry of upstart telecommunications companies.
Defaults surged as economies worldwide weakened and as credit conditions tightened. Many defaulting companies issued debt in the late 1990s, when credit was easier to obtain.
The default rate for "speculative-grade," or junk-rated, issuers surged to 8.57 percent last year from 5.68 percent in 2000, the highest since a record 10.87 percent in 1991, S&P said. About 4 percent of all issuers, including those with "investment-grade" ratings, defaulted in 2001, matching the record set in 1991, S&P said.
S&P expects the U.S. economy to bottom in the first quarter of this year, with the default rate peaking near 11 percent at the beginning of the summer, before easing by year's end.
"In a typical cycle, defaults peak six months after an economic bottom," said Diane Vazza, S&P's head of global fixed income research.
Telecoms accounted for 39 defaults, or 18.5 percent of the total last year, S&P said. Among them were one-time highfliers PSINet Inc. and Winstar Communications Inc.
This year, S&P said defaults will likely be more "broad-based" although "we'll see some concentrated weakness in certain areas of consumer products and retail," Vazza said.
Outside the U.S., Argentina, whose government defaulted on $141 billion of debt, accounted for 15 corporate defaults. Nine came from Canada, five from the United Kingdom, four from Australia, three from Poland, two from Mexico, and one each from Bermuda, Germany, Greece, Indonesia, Korea, the Netherlands, Norway, the Philippines, Russia, Thailand and Venezuela, S&P said.
Moody's Investors Service was expected Monday to report that 11 percent of U.S. junk-rated companies defaulted on their debt in 2001, the Wall Street Journal reported.