Bangkok--11 Nov--Standard & Poor's
Globally, nine companies (eight public and one confidentially rated) defaulted in the third quarter of 2011. The volume of rated debt affected by defaulters in the third quarter was $6.3 billion, down from 15 defaults in the second quarter with $39.5 billion in debt, said an article published by Standard & Poor's Global Fixed Income Research, titled "Quarterly Global Corporate Default Update And Rating Transitions."
Of the nine defaulters in the third quarter, seven are domiciled in the U.S. region, one is from Israel, and one is based in New Zealand. The seven U.S. defaulters accounted for 92.7% of the total $6.3 billion in debt affected. For more details about the defaulters in the second quarter, see "Third-Quarter 2011 Default Synopses," also published today.
"The trailing-12-month global speculative-grade default rate as of September 2011 was 1.65%, down slightly from 2% as of June and 3.4% as of the same period in 2010," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The default rate is now at its lowest point since June 2008--before the global financial crisis and the ensuing recession in the U.S."
"Overall credit quality has, in our view, remained stable over the past 21 months as the number of upgrades outpaced downgrades globally," said Ms. Vazza. "The downgrade-to-upgrade ratio rose to 0.98% in the third quarter from 0.64% in the previous quarter, but it's still below 1%." The increase in this ratio is partially attributable to the many downgrades of 'AAA' rated U.S. home loan banks. Standard & Poor's downgraded 22 U.S. home loan banks to 'AA+' following the U.S. sovereign downgrade on Aug. 5.
By rating category, default activity over the past four quarters relative to long-term averages indicates a prolonged period of favorable lending conditions globally. Even the 'CCC' to 'C' rating category had a default rate over the past four quarters that was nearly 10 percentage points lower than its long-term average.
An analysis of the transition rates during the four quarters ended Sept. 30 suggests that ratings behavior remains consistent with long-term trends, showing a clear negative correspondence between credit quality and default probability, in our opinion. The notable exception to this is the 'AAA' rating category, which saw a proportionately large number of entities in the U.S. downgraded to 'AA+' following the U.S. sovereign downgrade.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. 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:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760