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Update: corporate default rate review from Moody's

The global corporate speculative-grade default rate remained unchanged in January from the revised December 2004 figure of 2.3%, according to Moody's Investors Services. As a percentage of dollar volume, the global corporate speculative-grade default rate fell to 2.2% in January 2005 from a revised rate of 2.5% in December 2004.

In January, four corporate bond issuers defaulted on a total of $879 million of bonds. Two of the four defaulters were domiciled in the US, one in Brazil, and one in Sweden. The month's largest default was the $450 million distressed exchange completed by Levi Strauss & Company. By Moody's definition, a distressed exchange of debt constitutes a default. The other US-based default was IWO Holdings ($160 million). Brazil's Banco Santos S.A. ($100 million), and Sweden's Concordia Bus Nordic AB ($169 million) comprised January's two non-US defaults.

Moody's default rate forecasting model for its issuer-weighted global speculative-grade default rate indicates that the default rate will rise to a level near 3% by the end of February 2006. As previously reported, the expected increase in the default rate will occur after the default rate hits a cyclical low approximately at the end of this quarter or the beginning of the next.

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