The volume of syndicated bank loan defaults declined by more than 50% last year, according to Moody's Investors Service. For all of 2006, 28 issuers defaulted on about $6 billion of loans, down from 30 issuers defaulting on about $13.4 billion of loans in 2005. Of the 28 defaulters, eight were rated by the ratings agency.
Autos accounted for two-thirds of the 2006 distressed loan volume, with seven auto companies defaulting on about $42.3 billion of loans. Dana Corp., Dura Operating Corp., J.L. French Automotive Castings and Schefenacker are all auto names that defaulted last year.
The largest bank debt defaulter was LG Philips Displays Holding, which defaulted on $1.4 billion of bank debt. Dana Corp., along with Dana Credit Corp., was 2006's largest bond defaulter, defaulting on about $1.9 billion.
Moody's expects the default rate on both loans and bonds to rise this year. The default rate forecast for global speculative-grade bonds is expected to increase from 1.7% to 2.6% by the end of the year. That implies syndicated loan defaults will increase to 2.1% from 0.6% by the end of this year, the ratings agency says.