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Falling default rate for Europe's corporates, says Moody's

European default and recovery rates in 2004 show Europe is experiencing the benign credit environment that prevailed across much of the globe last year, reports Moody's Investors Service. During 2004, there were only five European bond defaulters, two rated by Moody's. The total volume of defaulted bonds in Europe was €1.9 billion, of which Moody's rated defaulters accounted for €1.4 billion. Both rated defaulters, Avon Energy Partners and Equitable Finance, are located in the UK.

The two rated loan defaults, Yukos Oil, which defaulted on approximately €800 million in loans, and Gate Gourmet which defaulted on roughly €300 million, had no outstanding bonds.

The low number of bond defaults led Moody's European speculative-grade default rate to decline in 2004 to 1.2%, from 6% in 2003 20.5% in 2002. There were no investment-grade defaults in Europe in 2004.

"The low number of bond defaults reflects in part a very benign credit environment in both Europe and globally and in part a continuing effort by European firms to improve their creditworthiness," says Praveen Varma, vice-president and author of Moody's "Default and Recovery Rates of European Corporate Bond Issuers: 1985-2004."

Moody's notes that losses for bondholders of the two rated European defaulters in 2004 were minimal.

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