Sovereign defaults continue to decline in 1998: S&P<\/p>\n
JAKARTA (JP): Despite financial stress in Asia and its fallout
\non emerging markets, debt defaults by sovereign governments would
\ncontinue to decline this year, according to the international
\nrating agency Standard & Poor's.<\/p>\n
The agency said in the October edition of its Asia Focus that
\nsovereign defaults by number of issuers fell to 37 in 1997, the
\nlowest level recorded since 1982, from 46 in 1996.<\/p>\n
The issuer default rate, in relation to the universe of all
\nsovereign governments, stood at about 18 percent in 1997, well
\nbelow its peak of 31 percent in 1990.<\/p>\n
The value of sovereign debt in default also declined in 1997
\nto US$77 billion, just a quarter of the amount in default in
\n1990.<\/p>\n
No new defaults occurred last year. This contributed to the
\ndecline.<\/p>\n
\"Developments thus far in 1998, moreover, suggest that the
\nnumber of sovereign issuers in default, as well as the total
\namount of defaulted debt, will fall again this year and possibly
\nin 1999, as well,\" the agency said.<\/p>\n
It predicted that the total value of sovereign defaults could
\nfall by as much as $42 billion to about $35 billion this year.
\nNext year, defaults could drop by another $10 billion.<\/p>\n
Several bank debt restructuring deals which were already
\ncompleted or in the pipeline should more than offset the impact
\non the number of any new sovereign defaults that occurred.<\/p>\n
The agency, however, warned that defaults on foreign currency
\nbonds, in contrast with defaults on bank loans, would remain
\nexceptional although from a longer-term perspective they were
\ngradually increasing.<\/p>\n
\"Bonds issued by Pakistan and Indonesia -- rated 'CCC' and
\n'CCC+', respectively, with a combined face value of about $1.2
\nbillion -- face the greatest risk of short-term default,\" it
\nsaid.<\/p>\n
It noted that the stock of rated foreign currency debt of
\nsovereign governments in the \"B\" and \"CCC\" categories currently
\nstood at some $44 billion.<\/p>\n
However, the agency said the majority of sovereign debt rated
\nin the \"B\" category would continue to perform this and next year.<\/p>\n
In the local currency debt, the agency predicted that defaults
\nwould be tailing off again after rising in 1995 and 1996. Local
\ncurrency debt defaults would continue to be relatively rare.<\/p>\n
Looking into the next decade, the agency said the sovereign
\ndefault rate would likely pick up again because of the downward
\nrating pressure currently affecting a number of emerging market
\ngovernments.<\/p>\n
\"Overall, however, the number of sovereigns in default, along
\nwith the total value of the affected debt, should be somewhat
\nlower than during the last major round of default in the 1980s,\"
\nStandard & Poor's said.<\/p>\n
It said bank debt almost certainly would feature less
\nprominently and foreign currency bonds much more so. As a result,
\ndefault rates on foreign currency bonds should eventually
\nconverge with the default rates on bank loans. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sovereign-defaults-continue-to-decline-in-1998-sp-1447893297",
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