Bangkok--2 Sep--Standard & Poor's
The recent slowdown in the economy, coupled with rising spreads, has led to a spike in the distress ratio, said an article published today by Standard & Poor's Global Fixed Income Research, titled "U.S. Distressed Debt Monitor." The distress ratio more than doubled, to 13.2% on Aug. 15 from 6.1% a month earlier.
The U.S. corporate speculative-grade bond spread widened 26% month over month to 694 basis points (bps) on Aug. 15. The default rate, which is a lagging indicator of distress, declined marginally, to 2.10% on July 31 from 2.25% at the end of June.
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.
The size of the corporate distressed universe more than doubled in August. "A total of 139 companies had issues trading with spreads of 1,000 bps and higher as of Aug. 15, up from 69 companies in July," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The last time we saw such a high level was in November 2009, when 140 companies had distressed issues." Along with this, the count of affected issues spiked to 204 from 94.
"With a rise in the distress ratio, the amount of affected debt also increased, to $87.4 billion as of Aug. 15 from $38.5 billion in July," said Ms. Vazza. Based on debt volume, media and entertainment, retail and restaurants, and high technology accounted for 48.7% of the total debt outstanding. Media and entertainment alone accounted for more than 25% of the distressed debt.
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Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760