Bangkok--1 Nov--Standard & Poor's
The U.S. corporate 12-month-trailing speculative-grade default rate has declined by almost 7.5 percentage points from its peak of 11.4% reached in November 2009, said an article published today by Standard & Poor's, titled "U.S. Corporate Default Rate Expected To Decline To 2.4% In September 2011, But Risks Still Loom." The default rate was 3.96% on Sept. 30, 2010, down from 5.96% at the end of the second quarter and 11.07% at the end of 2009.
This rise and fall of the default rate is very similar to what we saw in previous cycles, but the upswing this time around occurred faster and at a steeper slope. The decline so far has also been faster compared with previous cycles, but we believe that we have yet to see the bottom in the current cycle.
"We expect that the default rate will continue to decline next year," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "Our baseline projection for the U.S. corporate speculative-grade default rate in the 12 months ending in September 2011 is 2.4%. We believe that this likely will be close to the trough for this cycle."
Our alternative forecasts are 2.0% 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 and is a slight increase from the current level.
"Beyond the one-year forecast horizon, we believe that default risk could increase. A significant overhang of leveraged corporate issuers remains," said Ms. Vazza. More than 50% of speculative-grade issuers originated in 2003 to 2007 have survived, and nearly 80% of the survivors are rated in the 'B' category or lower.
"However, the improved access to the capital markets in 2010 and the modest amount of maturing debt in the next year are two factors that should keep default rates low in the one-year forecast horizon," said Ms. Vazza.
The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760