Credit Woes Reshape US Corporate Bond Mkt: Fitch Launches Credit Insight.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 9, 2002

Fitch Ratings has launched a new quarterly publication dedicated to tracking and analyzing evolving credit trends in the U.S. corporate bond market. The new study offers a macro view of essentially the entire U.S. corporate bond market, encompassing 2,517 U.S. domiciled issuers and 16,540 bond issues as of June 30.

While new issuance of nonconvertible corporate bonds topped $1 trillion in the 18 months leading to June 30, 2002, the bulk of that issuance represented refinancing of existing debt. The actual size of the performing U.S. corporate bond market grew 14% from $2.28 billion on Dec. 31, 2000 to $2.6 billion on June 30, 2002.

'The most notable change over the eighteen month period was a marked decline in the volume of 'A'-rated bonds and a substantial increase in the volume of 'BBB' and 'BB' rated issues,' said Mariarosa Verde, senior director of Credit Market Research, Fitch Ratings. 'This was due overwhelmingly to downgrades. In fact, the market's par-weighted average credit quality shifted from 'A-' to 'BBB+' from Dec. 31, 2000 to June 30, 2002.' The widespread erosion in credit quality reached its zenith in the unprecedented volume of defaults in the U.S., a record $110 billion from Dec. 31, 2000 to June 30, 2002.

Overall, the volume of investment grade bonds grew 12.5% over the eighteen-month period while speculative grade issues grew 22.9%. 'As of June 30, investment-grade bonds represented 82% of the U.S. corporate bond market, down from 84% in December 2000' said Paul Mancuso, Director of Credit Market Research, Fitch Ratings. 'The share held by speculative grade issues increased from 16% in December 2000 to 18% in June 2002.'

Other findings discussed in the report include:

--Excluding banking and finance, all other industry sectors saw aggregate bond volume growth of 24% from Dec. 31, 2000 to June 30, 2002;

--At the end of this year's second quarter, the industries with the largest concentration of investment-grade bonds included banking and finance, insurance, utilities, food, beverage and tobacco, and real estate;

--The industries with the lowest concentration of investment-grade bonds included cable, building and materials, textile and furniture, leisure and entertainment, and gaming, lodging and restaurants; and,

--Nearly 20% of U.S. corporate bond volume was concentrated in just ten companies.

The report, titled 'Fitch Launches Credit Insight: Credit Woes Reshape U.S. Corporate Bond Market' is available on the Fitch Ratings web site at 'www.fitchratings.com' under the 'Credit Market Research' section. A copy is also available by contacting the Ratings Desk at 1-800-893-4824.