Thursday, January 03, 2008

Analysts: Corporate Defaults to Rise "Drastically"

by Bill McBride on 1/03/2008 05:51:00 PM

From the WSJ Deal Journal: Citi and J.P. Morgan Predict a Buffet of Defaults (hat tip James)

With credit flowing to practically any company in need of cash in recent years, the rate of defaults for U.S. high-yield companies fell to just 0.34% in December, according to a J.P. Morgan Chase analysis. The J.P. Morgan analyst, Peter Acciavatti, predicts that is about to rise drastically, to 4% by the end of 2009 ... Citigroup expects the default rate to surge to 5.5% ...
And from Bloomberg: Buffets Misses Coupon Payment; Bonds Fall to New Low
Buffets Inc., the largest operator of buffet-style restaurants in the U.S., failed to make a coupon payment on $293 million of debt, sending the bond prices plunging to a record low.
The missed payment sparked concerns that corporate defaults are starting to escalate as the worst home sales market since 1981 slows the economy. Tousa Inc., the Florida homebuilder that lost 99 percent of its market value in the past year, also missed interest obligations on $485 million in debt, the company said in a regulatory filing yesterday.