High yield defaults fall to 9.2% in September, Moody's says

New York, Oct. 18 - The global high-yield default rate fell to 9.2% in September from 9.6% in August, according to Moody's Investors Service.

The decline is the seventh in the last nine months, the rating agency added.

Moody's now sees defaults falling to 8.4% at the end of 2002 and 7.4% in a year's time, at the end of the third quarter of 2003.

However the rating agency cautioned that credit quality is still under pressure and default rates will remain high for the foreseeable future.

"The forecasted improvement in the default rate is largely being driven by the fact that the pace of default activity reached a peak in the first half of 2002, said David T. Hamilton, director of default research at Moody's, in a news release. "While we expect default activity to be high in nominal terms, it will be relatively less intense in 2003."

In September, seven rated issuers defaulted on a total of $13.2 billion of bond. The three biggest defaults were Telewest Commuications at $5.2 billion, AT&T Canada at $3 billion and NRG Energy at $3 billion.

Moody's also said the dollar-volume weighted high yield default rate fell for the first time in 16 months to 18.3% in September from 18.4% in August. The 9% difference between the issuer-weighted and dollar volume-weighted default rates is the highest on record, the rating agency added, noting the large average size of defaults in 2002 has kept the dollar figure rising even as the number of issuers defaulting has declined.

Of September's defaults, three totaling $6.2 billion were from issuers that had investment-grade ratings a year before the default. So far in 2002, 10 issuers with $41.7 billion of debt had investment-grade ratings a year before they defaulted. WorldCom Inc. was the biggest, accounting for $23.2 billion of the total dollar value.

For the third quarter, Moody's said 25 rated issuers defaulted on $56.9 billion of debt. By comparison, in the third quarter of 2001 40 issuers defaulted on $21.3 billion of debt.

For the first nine months of 2002, 115 issuers defaulted on $138.8 billion of debt compared to 139 issuers and $71.5 billion in the same period a year earlier.

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