European Markets Edge Towards Equilibrium Despite Record Defaults

Although the European leveraged finance market experienced a significant deterioration in credit ratings during 2002, the ratio of upgrades versus downgrades has started to stabilise in 2003, according to a report by Moody’s. ‘During 2002, rating trends in European leveraged finance remained very negative, with 71 downgrades compared to 56 in 2001,’ said Amanda Neff, Vice President-Senior Analyst at Moody’s London office and co-author of the report. Moody’s also noted that 2002 was a record year for defaults in Europe, with 32 defaults at a volume of over EUR43 billion – roughly twice that of the defaults recorded during the entire period of 1985-2001. ‘However, there are several encouraging trends that point to a broadening of horizons in this market,’ said Michael West, a Moody’s Senior Vice President. First of all, although issuance was relatively weak during 2002, the overall size of the market increased due to the influx of large fallen angels with approximately EUR40 billion in rated debt, such as ABB and Vivendi Universal.


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