February 10, 2010 / 6:23 PM / 10 years ago

Global debt defaults hit record $329 bln - Moody's

NEW YORK, Feb 10 (Reuters) - A record $329 billion of corporate debt worldwide defaulted in 2009 as a protracted global recession sapped companies’ ability to pay their debt, Moody’s Investors Service said on Wednesday.

Defaults were up 17 percent from 2008, when they totaled $281 billion, the previous record high, Moody’s said in a report.

Defaults over the past two years have dwarfed any previous two-year period, “showing the unprecedented impact that the global economic recession has had on the default environment,” Moody’s said.

By comparison, the 2001-2002 bankruptcy wave, which included the massive failures of WorldCom and Enron, was responsible for just $342 billion of defaults, versus $610 billion during 2008-2009, according to Moody’s data.

North America accounted for $291 billion of last year’s defaults, while Europe accounted for about $16 billion.

Top defaulters in 2009 included General Motors, with $47.8 billion of debt, CIT Group Inc (CIT.N) with $42.3 billion, LyondellBasell’s Lyondell Chemical with $19.2 billion, and Charter Communications Operating LLC with $10.8 billion, Moody’s said.

CIT Group was counted among the defaulters because of a distressed debt exchange, while bankruptcies triggered the other defaults, Moody’s said.

In contrast to 2008, when failures of large banks such as Lehman Brothers boosted default volumes, nonfinancial issuers drove defaults in 2009, accounting for 74.8 percent of the total volume, Moody’s said.

Moody’s has forecast that the global junk bond default rate will tumble to 3.3 percent by the fourth quarter from 13 percent at the end of 2009 as a global recovery takes hold.

The 2009 default rate peaked at 13.4 percent in November, the highest rate since World War II. The record high was 15.4 percent during the Great Depression.

Reporting by Dena Aubin;Editing by Diane Craft

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