Bangkok--6 Jun--Standard & Poor's
The 2011 global corporate default tally remains at 15 after no issuers defaulted this week, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (May 27 - June 2, 2011) (Premium)." This is the fourth consecutive week without a global corporate default.
Of the 15 defaults so far this year, 10 were based in the U.S., two were based in New Zealand, and one each was based in Canada, the Czech Republic, and Russia. By comparison, 40 global corporate issuers had defaulted by this time in 2010. Of these defaulters, 28 were U.S.-based issuers, two were European issuers, three were from the emerging markets, and seven were in the other developed region (Australia, Canada, Japan, and New Zealand).
Standard & Poor's baseline projection for the U.S. corporate trailing 12-month speculative-grade default rate for March 2012 is 1.6%. A total of 24 issuers would need to default from April 2011 to March 2012 to reach the forecast. The projection of 1.6% is another 0.86-percentage-point (or another 35%) decline from the 2.46% default rate in March 2011. This rate of decline would be sharp, but slower than the decline over the past 16 months. Improved lending conditions and a lower cost of capital are keeping our default expectations relatively upbeat in the next 12 months. We are seeing stronger credit quality, as reflected in fewer downgrades and lower negative bias.
In addition to our baseline projection, we forecast the default rate in our optimistic and pessimistic scenarios. In our optimistic default rate forecast scenario, the economy and the financial markets improve more than expected. As a result, we would expect the default rate to be 1.2% (18 defaults in the next 12 months).
On the other hand, if the economic recovery stalls and the financial markets deteriorate--which is our pessimistic scenario--we expect the default rate to be 3.3% (50 defaults) by March 2012. We base our forecasts 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. We update our outlook for the U.S. issuer-based corporate speculative-grade default rate each quarter after analyzing the latest economic data and expectations.
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