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Bondholders have telecom to thank for much of the worthless paper they've been left holding in the last year. But a new report says the blizzard of debt defaults is mostly behind us now.

New data released Tuesday by Standard & Poor's indicate that global corporate loan defaults will hit a record $157.3 billion in 2002. That's up a sharp 34% from a dismal 2001 figure, thanks in large measure to the tanking telecom sector, the rating agency says.

The good news, say analysts, is that 2003 looks much improved -- especially in telecom -- as some of the industry's most devastating collapses recede into history. With the big players having undergone far-reaching restructurings and many smaller competitors having vanished, the industry is certainly at least modestly healthier now than it was at this time last year.

"After a while, the math works in your favor," says CreditSights analyst Glenn Reynolds. "There's a sheer lack of companies left to default."

The news is important to shareholders, because developments in the bond market foreshadowed some of the telecom sector's darkest days in 2002. Big telcos including

Qwest

(Q)

and

Sprint

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saw their shares hit hard by liquidity worries that came to a head when the companies' short-term funding operations were stymied by risk-averse bond investors.

But having gone through the wringer once, many of these companies appear to be in better shape now, investors say.

Of course, the 2002 numbers are ugly, even if they do suggest some relief ahead. Telecom-related defaults will soar to $74.8 billion in 2002, more than doubling last year's $34.9 billion tally, according to S&P's preliminary report. Telecom defaults will account for half of all defaults worldwide this year, up from 30% last year.

The 2002 debt-default casualty list is striking. Some of the biggest names in tech -- including telcos

WorldCom

, which defaulted on some $31.9 billion in debt,

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Global Crossing

, with $5.6 billion, and

McLeodUSA

, with $4.6 billion; and cable companies

Adelphia

, at $14.3 billion, and

NTL

, at $10.8 billion -- left bondholders holding the bag during a star-crossed year.

Plenty of uncertainty remains for the coming year, what with the economy still soft and the big telcos still focusing on offsetting their revenue declines by cutting costs. But all the job cuts and product shutdowns that have caused so much investor pain in the last year should make debt defaults at the big remaining telcos less likely, investors say.

Take a few of the industry's most obviously teetering shops, such as Qwest,

Lucent

(LU)

and

Nortel

(NT)

. By no means are these companies clear of the turmoil, but it appears that the last year has given them enough time to stabilize their finances enough and outlast the bust.

"Qwest has been the wild card," says Reynolds. "And we expect them to stay out of default, since they have adequate asset coverage.

"Basically," says Reynolds, "the telecom bubble is mostly in the past."