Bangkok--18 Nov--Standard & Poor's
Standard & Poor's Ratings Services lowered its ratings on U.S.-based freight service company Trailer Bridge Inc. to 'D' after the company failed to make principal and interest payments on its $82.5 million senior secured notes that matured Nov. 15, 2011. This raises the tally of global corporate defaults in 2011 to 41, said an article published today by Standard & Poor's Global Fixed Income Research, titled "Global Corporate Default Update (Nov. 10 - 16, 2011)." Trailer Bridge is the third company to default twice this year--the other two are Real Mex Restaurants Inc. and William Lyon Homes.
Of the total defaulters this year, 30 are based in the U.S., three are based in New Zealand, two are in Canada, and one each is in the Czech Republic, Greece, France, Israel, Italy, and Russia. Of the defaulters by this time in 2010, 55 were U.S.-based issuers, nine were from the other developed region (Australia, Canada, Japan, and New Zealand), eight were from the emerging markets, and two were European issuers.
Seventeen of this year's defaults were due to missed interest or principal payments and eight were due to distressed exchanges--both of which were among the top reasons for defaults in 2010. Bankruptcy filings followed with seven defaults, and regulatory actions accounted for three. Of the remaining defaults, one issuer failed to finalize refinancing on its bank loan, one had its banking license revoked by its country's central bank, another was appointed a receiver, and three were confidential. By comparison, in 2010, 28 defaults resulted from missed interest or principal payments, 25 from Chapter 11 and foreign bankruptcy filings, 23 from distressed exchanges, three from receiverships, one from a regulatory directive, and one from administration.
"We expect the U.S. corporate trailing 12-month speculative-grade default rate to rise to 3.1% by September 2012 from 1.94% as of September 2011. The baseline projection is still lower than the long-term average of 4.59%," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "A total of 48 issuers would need to default in the 12 months from October 2011 to September 2012 to reach this projection. By comparison, 28 speculative-grade issuers defaulted from October 2010 to September 2011."
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 1.6% by September 2012 (25 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 5.1% (79 defaults in the next 12 months). We base our forecasts on quantitative and qualitative factors, 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.
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 Contacts:
Diane Vazza, New York (1) 212-438-2760