Bangkok--27 Dec--Standard & Poor's
Distress in the U.S. speculative-grade bond market fell to a 26-year low of 1.6% in December, according to an article published today by Standard & Poor's. The article, which is titled "U.S. Distressed Debt Monitor," says that the distress ratio has been continuing its recent fall since reaching a 2006 high of 5.7% in February. At 1.6%, the distress ratio is considerably lower than the 6.1% average recorded in full-year 2005 and 7.4% in 2004. The average distress ratio for 2006 stands at a 3.7%, the lowest annual average since the 1997 level of 3.3%.
In the U.S., automotive and health care--sectors that have continued to appear at or near the top of this list in recent months--showed the highest propensity for distress as a share of total speculative-grade rated issues. Following behind health care was the retail/restaurants sector.
The retail/restaurants; forest products and building materials; and chemicals, packaging, and environmental services sectors saw the largest increase in the share of distressed credits relative to November. Sectors with the largest declines in the share of total distressed credits were telecommunications, transportation, and automotive.
The high tech segment emerged as a new potential source for distressed credits under the 800-basis point (bp) threshold, while the retail/restaurants; chemicals, packaging, and environmental services; and media and entertainment sectors moved up at the 600-bp threshold. "Emerging vulnerability from these alternative thresholds might offer value as a prospecting tool to the distressed investor community or prompt investors with exposure to these sectors to hedge appropriately," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
A total of 97 rated companies had issues trading at distressed levels at the various thresholds, slightly lower than November's level of 102.
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