Bangkok--4 Aug--Standard & Poor's
The total number of defaults remained at six in the second quarter of 2006, the same as in the first quarter and down from nine defaults in the fourth quarter of 2005, according to a report released today by Standard & Poor's Ratings Services. The report, titled "Quarterly Default Update And Rating Transitions," states that the volume of rated debt affected by last quarter's defaults was US$1.2 billion, down from US$4.3 billion a quarter ago and US$3.2 billion recorded in the second quarter of 2005.
All six defaults that occurred in the second quarter were nonfinancial entities. Four of the six companies that defaulted are based in the U.S., one from Canada and one from France. Globally, the corporate default rate for speculative-grade and investment-grade rated entities inched down to 0.09% at the end of the second quarter of 2006 from 0.13% in the same period of 2005. The global speculative-grade default rate for the 12 months ended June 30, 2006 is 1.13%, slightly higher than the two previous months but well below the long-term (1981-2005) average of 4.61% for 29 consecutive months.
In the U.S., results from a proprietary default forecast model indicate that U.S. speculative-grade default rates will continue to edge up slowly over the next few quarters, reaching 3.6% by the end of the second quarter of 2007 (results are based on running the model on July 10, 2006). The average forecast for the next four quarters (2.9%) is slightly higher than the historical average of the trailing four quarters (2.0%).
"The global downgrade to upgrade ratio declined for a second consecutive quarter, and remains just a notch above its lowest level since the last turn in the credit cycle in 2001-2002," observed Diane Vazza, Managing Director and head of Standard & Poor's Global Fixed Income Research. Both upgrades and downgrades recorded increases, but the relative strength in the former more than offset the increase in downgrades.
A companion report that was also released today by Standard & Poor's, "Second-Quarter 2006 Defaults In Profile," summarizes the events leading up to each default and, in some cases, the events following default. Also included are the defaulting instruments for each company that were rated by Standard & Poor's. Companies that were confidentially rated by Standard & Poor's are not included. Of the total defaults in the second quarter, one entity was not rated at the time of default.
The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com . If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected] . The report is also available at www.sandp.com/gfir , listed under Global Fixed Income Research. If you have not previously registered with the site, you will need to do so to access this material. Registration requires minimal information and is free. Members of the media may request a copy of this report by contacting the media representative name provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760