Jan. 9 (Bloomberg) -- The risk of companies defaulting on their debt rose a sixth straight day as concerns lingered that lenders including Countrywide Financial Corp. won't be able to ride out the worst housing slump in 27 years.

Contracts on the Markit CDX North America Investment Grade Series 9 Index, a benchmark gauge of default risk tied to the bonds of 125 companies including Countrywide, climbed 3.75 basis points to 100 basis points as of 8:15 a.m. in New York, according to Deutsche Bank AG. The index is at the widest since the CDX indexes started trading four years ago.

Credit-default swaps on Countrywide moved deeper into distressed levels for a second day on concern that rising mortgage defaults and the collapse of the subprime mortgage market will force the Calabasas, California-based company into bankruptcy.

Sellers of credit-default swaps were demanding 30 percent upfront and 5 percent a year for contracts protecting Countrywide bondholders from default for five years, according to broker Phoenix Partners Group in New York. That compares with 28 percent upfront and 5 percent a year at the close of trading yesterday.

There is ``no substance'' to rumors that the company will file for bankruptcy, spokesman Rick Simon said yesterday. The speculation sent shares plummeting 28 percent, the most since October 1987. The company has said it has adequate liquidity to run its business and predicted in October it will be profitable this year.

`Stabilization' Needed

``We wish we felt reassured by Countrywide's statement that there is no substance to the rumors about a possible bankruptcy and/or ratings downgrade,'' Gimme Credit LLC analyst Kathleen Shanley in Chicago wrote in a note to investors yesterday. ``Countrywide needs some stabilization of the overall mortgage sector to restore confidence that it can survive the current crisis.''

Countrywide credit-default swaps rose today even as the company said in a statement that home loans in December were a better-than-forecast $24 billion.

The CDX index has soared more than 22 basis points in the first six days of trading this year on concern that the housing slump will drag the broader economy into a recession and deepen losses at financial companies, potentially pushing some into bankruptcy.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality.

Chances of Default

Countrywide's credit-default swaps suggest that investors have priced in a 77 percent chance the company will default in the next five years, according to a JPMorgan Chase & Co. valuation model used by Bloomberg.

The Markit LCDX Series 9 index, a gauge of confidence in the U.S. high-yield, high-risk loan market that falls as sentiment worsens, fell 0.1 point to 95.45, according to Goldman Sachs Group Inc.

In Europe, credit-default swaps on the Markit iTraxx Crossover Series 8 Index of 50 companies with mainly high-risk, high-yield credit ratings rose 10 basis points to 402 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies climbed 3.75 basis points to 66.5 basis points, JPMorgan prices show.

Countrywide shares dropped $2.17 to $5.47 yesterday in New York Stock Exchange composite trading. They tumbled 79 percent last year.

To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net

Last Updated: January 9, 2008 08:25 EST