Global Default Rate Declining, But Still High
The global corporate default rate is on track to end 2003 at above average levels, marking the fifth consecutive year of above average default rates, according to a report published by Standard & Poor’s Risk Solutions. Corporate defaults declined slightly during the third quarter of 2003, however, to 33 companies defaulting on $16.0 billion of debt. The sluggishness of the decline in default rates is the result of weak corporate credit quality and a bland economic recovery, and it signals continued high default rates for the foreseeable future, according to Standard & Poor’s. ‘Further gradual declines in the default rate may be seen in the coming months as a rudimentary economic recovery takes effect,’ said Brooks Brady, Associate Director for Corporate Default Research, Standard & Poor’s Risk Solutions. To date in 2003, 106 companies have defaulted on $50.2 billion, which is far from last year’s 235 companies defaulting on $189.9 billion.