Fineman sees defaults exceeding $130 billion

NEW YORK (Reuters) - The U.S. faces an unprecedented $130 billion in defaults, which will translate into tremendous buying opportunities for distressed players, Michael Fineman, portfolio manager for Third Avenue, told the Restructuring Summit on Wednesday.

"Given the size of the high yield market and leveraged loan and the forecast by JPMorgan of default rates in 2009, it is anticipated that total default volumes in 2009 can reach and exceed the $130 billion levels experienced during 2001 and 2002 combined," said Fineman of Third Avenue, the house of famed value guru Marty Whitman.

Fineman told reporters that the markets are in their "very early innings" for distressed opportunities. "We are in the very early innings and there has been a lot more bankruptcy filings," since this summer, he added.

"A lot of people talk about the 2001-2002 cycle having been very good to distressed investors ... but in just one year, we can reach that level of default that we experienced in 2001-2002 combined," Fineman said.

Fineman noted that seven years ago, when credit tightened considerably amid the collapse of Enron and WorldCom, the default rate for junk bonds shot up to 10-12 percent, compared with just 1 percent for the past four years.

That suggests default rates are likely to rise much more -- allowing investors to pick up bonds at depressed levels, and profit when they rise.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Jennifer Ablan; Editing by Phil Berlowitz)