Bangkok--26 Oct--Standard & Poor's
October marked another month of a lag in political decision-making in Europe, economic weakness in the developed world, and volatility in the financial markets, said an article published today by Standard & Poor's Global Fixed Income Research, titled "U.S. Distressed Debt Monitor." Although investors are hopeful that the late-October and early-November meetings in Europe will lead to a sovereign debt solution, investors remained risk averse, U.S. speculative-grade issuance remained depressed, and our distress ratio continued to increase.
"The distress ratio increased to 19.3% on Oct. 14 from 14.9% a month earlier," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The default rate, which is a lagging indicator of distress, declined to 1.94% on Sept. 30 from 2.09% at the end of August."
Standard & Poor's distress ratio is 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 basis points (bps) relative to Treasuries.
"The size of the corporate distressed universe increased significantly in October," said Ms. Vazza. "A total of 208 companies had issues trading with spreads of 1,000 bps and higher as of Oct. 14, up from 162 in September." The last time we saw such a high level was in August 2009. Along with this, the count of affected issues spiked to 291 from 227.
"With a rise in the distress ratio, the amount of affected debt also increased, to $116.8 billion as of Oct. 14 from $94.5 billion in September," said Ms. Vazza. Based on debt volume, media and entertainment, high technology, and oil and gas accounted for 46.8% of the total debt outstanding. Media and entertainment alone accounted for more than 26% 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