NEW YORK – In a fresh sign that the credit woes of companies worldwide have not abated, Standard & Poor's said on Thursday that 41 issuers defaulted on $31.3 billion of rated bonds in January. Both totals set records for a single month.
Among the higher profile defaults were those of Bermuda-based emerging telecommunications company Global Crossing Ltd. , with $7.6 billion of bonds according to S&P, and Troy, Michigan-based discount retailer Kmart Corp. , with $3.8 billion. Both sought bankruptcy protection.
The old records for defaults were set in December, when 27 issuers defaulted on $25.3 billion of bonds, S&P said. Among these was energy trader Enron Corp..
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.
"Typically, defaults reach a peak about six months after the bottom of a recession, which would suggest a peak at the beginning of summer," said Diane Vazza, S&P's head of global fixed-income research.
On Wednesday, the Commerce Department said U.S. gross domestic product grew at a 0.2 percent annualized rate in the fourth quarter, confounding economists who expected a decline. This suggests that the U.S. recession that began last March may be ending or over.
S&P said 18 of January's defaulting companies came from the United States, including Cedar Rapids, Iowa-based emerging telecom McLeodUSA Inc. , North Charleston, South Carolina-based fabric maker Polymer Group Inc. and Denver-based media company United Globalcom Inc. .
Another 18 came from Argentina, following that country's default on some of its debt, it said. The other five came from Bermuda -- Global Crossing -- as well as Australia, Britain, France and Poland.
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.
S&P said its "junk bond" default rate, which ended last year at 8.57 percent, will rise in the first half of this year, before declining to near that level by year end.
"Media, telecom and high-tech remain three of the weaker sectors," said Vazza. "Beyond that, the risks of default are widely dispersed by sector."