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Corporate debt default hits record lows

If proof is needed that the global economy is returning to health then it arrives with news that speculative corporate default rates are set to fall by 50% in 2003, with further declines expected in 2004, according to the risk solutions team at S&P’s.


With the corporate debt default rate standing at 4.5% for 2003 records are being set - not since 1998 has the global default rate fallen below the long-term average of 5.2%.


Emerging market speculative grade default rates have made the most dramatic falls, from 14.8% in 2002 to just 2.4% for 2003. Europe’s rate is expected to be nearer 3% for 2003, while the speculative grade default rate in the US lags behind at 5.2%, though comparing favourably with 7.4% in 2002 and 9.8% in 2001.


“After the extraordinary years of 2001 and 2002, when 9% and 9.3% respectively, of speculatively rated companies defaulted globally, only 4.5% of such companies are expected to have defaulted by the end of 2003,” notes Brooks Brady, an associate director of default research at S&P’s. “This marks the first year since 1998 that global default rates have been below the long-term average of 5.2%.”

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