Bangkok--2 Sep--Standard & Poor's
Defaults remain few even as weaknesses in the U.S. economy and uncertainty in the financial markets persist. The speculative-grade corporate default rate declined to an estimated 2.0% in August from 2.1% in July, said an article published today by Standard & Poor's Global Fixed Income Research, titled "U.S. Credit Metrics Monthly: Default Rate Continued To Decline In August As The Credit Markets Weakened."
In the U.S., three companies defaulted in August: one from the forest/building products/homebuilders sector and two from the transportation sector.
"The U.S. corporate speculative-grade spread rose to 712 basis points (bps) at the end of August from 552 bps at the end of July, reflecting the continued economic challenges and the increased anxiety among investors," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. By comparison, the speculative-grade spread was 675 bps a year ago.
The U.S. corporate investment-grade spread increased to 210 bps at the end of August from 170 bps at the end of July and slightly from the 205 bps a year ago. Standard & Poor's distress ratio climbed to a level last seen in year-end 2009: It more than doubled to 13.2% on Aug. 15 from 6.8% a month earlier.
"The preliminary estimate for the U.S. 12-month-trailing speculative-grade default rate as of August is 2.0%, slightly lower than the 2.1% for the previous month," said Ms. Vazza. "We expect the speculative-grade default rate to decline to a mean forecast of 1.6% by June 2012. Alternatively, the default rate could climb to 4%, according to our pessimistic scenario, or fall to 1.2%, based on our optimistic scenario."
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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