Bangkok--18 Oct--Standard & Poor's
The year-to-date 2010 global corporate default tally remains unchanged at 68 after no issuers defaulted this week, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (Oct. 8 - 14, 2010) (Premium)."
By region, the current year-to-date default tallies are 46 in the U.S., three in Europe, eight in the emerging markets, and 11 in the other developed region (Australia, Canada, Japan, and New Zealand).
So far this year, missed interest or principal payments are responsible for 23 defaults, Chapter 11 and foreign bankruptcy filings account for 22, distressed exchanges account for 18, receiverships are responsible for three, and regulatory directives and administration account for one default each.
Of the global corporate defaulters in 2010, 42% of issues with available recovery ratings had recovery ratings of '6' (indicating our expectation for negligible recovery of 0% to 10%), 12% of the issues had recovery ratings of '5' (modest recovery prospects of 10% to 30%), 8% had recovery ratings of '4' (average recovery prospects of 30% to 50%), and 17% had recovery ratings of '3' (meaningful recovery prospects of 50% to 70%). And for the remaining two rating categories, 12% of the issues had recovery ratings of '2' (substantial recovery prospects of 70% to 90%) and 10% had recovery ratings of '1' (very high recovery prospects of 90% to 100%).
In our view, a modest amount of maturing debt over the next four quarters is one of the key factors that should keep default rates low in the one-year forecast horizon, even though many speculative-grade issuers could have a tough time refinancing if financial conditions worsen materially.
Our baseline projection for the U.S. corporate speculative-grade default rate in the 12 months ending in June 2011 is 2.8%, with alternative scenarios of 2.5% at the optimistic end and 4.5% at the pessimistic end. Our pessimistic scenario is the same as the long-term (1981 to 2009) average default rate. Our forecasts are based on quantitative and qualitative factors that we consider, including, but not limited to, Standard & Poor's proprietary default model for the U.S. corporate speculative-grade bond market.
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