Bangkok--28 Mar--Standard & Poor's
The U.S. economy began 2011 on strong footing, but recent events in the Middle East and Japan are providing fodder for some pessimism in the financial markets, according to an article published today titled "U.S. Distressed Debt Monitor (Premium)."
"This has not yet resulted in an increase in default activity, however, as the U.S. speculative-grade corporate default rate came in at 2.75% at the end of February," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research.
The U.S. speculative-grade corporate bond spread, although still at historically lower levels, was 507 basis points (bps) on March 15, up from 464 bps a month earlier. With the increase in the corporate bond spread, the distress ratio also rose, coming in at 5.24% on March 15, versus 3.97% a month earlier.
Standard & Poor's distress ratio is defined as the number of distressed securities divided by the total number of speculative-grade-rated issues. Distressed credits are speculative-grade-rated issues that have option-adjusted spreads of more than 1,000 bps relative to Treasuries.
Both the corporate and leveraged loan distress ratios fell in February. The S&P/LSTA Leveraged Loan Index distress ratio declined to 4.4% at the end of February from 5% in the previous month.
A total of 58 companies currently have issues trading with spreads of 1,000 bps and higher--predictably higher than the 49 in February. Along with this, the count of affected issues increased to 79 as of March 15 from 59 in February.
With an increase in the distress ratio, the amount of affected debt has also increased, rising to $32.9 billion as of March 15 from $18.2 billion in February. Based on debt volume, the media and entertainment, retail/restaurants, and oil and gas sectors accounted for 57.6% of the total debt outstanding. Oil and gas alone accounted for more than 25.5%.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. 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:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760