1)       Standard & Poor's has released first-glance year-end results for our Corporate Default study 2001.  Details are provided below.  Final default statistics for 2001, including a list of all defaulted companies, will be published in more detail at the beginning of next month.
2)       Standard & Poor's recap of sovereign credit performance in 2001 is now available on our website.  Go to www.risksolutions.standardandpoors.com <http://www.risksolutions.standardandpoors.com/> scroll down to click the gray box for research and then click the link for  "Sovereign default and transition research"
 
The number of annual corporate defaults has exceeded 200 for the first time ever, with 211 issuers defaulting on approximately US$115.4 billion of debt through Dec. 31, 2001, according to the latest figures compiled for Standard & Poor's annual default study. This dwarfs the previous record set only last year when 132 issuers defaulted on US$42.3 billion of debt in 2000.
 
Significantly, 3.99% of all issuers defaulted during 2001, which essentially equals the previous record of 4.01% reached in 1991, when the universe of issuers was much smaller, and far surpasses 2000's 2.56% global default rate.  
 
8.57% of issuers that were speculative grade at the beginning of 2001 defaulted last year, compared to 5.68% in 2000, the highest speculative default rate since the record level of 10.87% set in 1991.
 
In a typical cycle defaults peak six months after an economic bottom.  Standard & Poor's believes the US economy will bottom in the first quarter of this year and then improve gradually.  We would expect to see continued high default rates, with defaults peaking at the beginning of the summer, when speculative grade default rates could reach 11%, and then trailing off at year end."
 
0.27% of issuers that were investment grade at the beginning of 2001 defaulted last year, which far surpasses 1991's 0.19% and 2000's 0.15%.  The record level of investment grade defaults, 0.28%, was set in 1982.  However, only 10.0% of issuers defaulting in 2001 were originally rated investment grade, well below the twenty-year average of 13.1%.  Defaults of issuers that were rated investment grade at that start of the year represented 5.06% of issuers defaulting during 2001, less than the twenty-year average of 5.24%.
 
The year began and ended with quarters marked by several very large defaults, Southern California Edison and Pacific Gas & Electric in the first quarter and the well-publicized default of Enron in the fourth.  In dollar terms, these three issues alone accounted for approximately 20% of all defaults in 2001.
 
Defaults in 2001 were concentrated in the telecom sector, which accounted for 18.5% of all defaults.  Although telecom defaults began to ease at the end of last year, with only 6 reported in the 4th quarter.  In 2002 we expect defaults to be more broad-based than they were in 2001 although we'll see some concentrated weakness in certain areas of consumer products and retail. 
 
One hundred sixty-two defaults took place in the U.S., followed by Argentina with fifteen, Canada with nine, the U.K. with five, four in Australia, three in Poland and two in Mexico. One default each took place in Bermuda, Germany, Greece, Indonesia, Korea, the Netherlands, Norway, the Philippines, Russia, Thailand and Venezuela.
 
In Argentina 10 banks were classified as defaulting as a result of the government imposed limits on bank account withdrawals.  In 2002, the risk of additional defaults in Argentina will remain high as the economic turmoil runs its course.  
 
Risk Solutions, www.risksolutions.standardandpoors.com <http://www.risksolutions.standardandpoors.com/>, the customized risk services arm of Standard & Poor's, provides customized credit risk solutions, models and data to help clients manage their risk.  If you have any further questions about Risk Solutions, or if a colleague would like to be added to our mailing list, please write to us at risksolutions@standardandpoors.com <mailto:risksolutions@standardandpoors.com> and include your full contact information. 


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