The Bond Investors Association yesterday reported that $3.1 billion of municipal debt either defaulted, went into technical default, or was deemed to be at significant risk of default during the first half of 1991.
About $2.1 billion of that sum came in the second quarter alone, largely because the association has already counted as defaulted all $1.85 billion of guaranteed investment contracts backed by Executive Life Insurance Co., which was seized by regulators in April and placed in conservatorship.
At least three Executive Life issues, representing about $600 million of the total, have actually missed scheduled bond payments -- the traditional definition of default. But the Bond Investors Association uses a broader definition and does not distinguish between defaults, technical defaults, and other issues that are at risk but have not yet missed payments.
That policy has prompted some analysts to say the association's numbers overstate historic default patterns. But Richard Lehmann, president of the association, says the broad definition is more valuable to the market because it warns investors of potential default risks and possible resulting market value losses.
Mr. Lehmann said yesterday that many of 1991's defaults date back to issues sold in 1985 and 1986, when thousands of issues were "pushed out the door to beat tax law changes then before Congress."
The association counted 36 issues totaling $2.1 billion as defaulted in the second quarter and 53 issues totaling $989 million in the first quarter. for all of last year, 144 issues totaling $1.8 billion fit the association's definition of default.
The association, a nonprofit company, is one of the most visible suppliers of default statistics for both the municipal and corporate bond markets. J. Kevin Kenny, president of J.J. Kenny Co., last month said his company intends to begin tracking municipal defaults as well.