Bangkok--24 Jan--Standard & Poor's
A total of 70 rated companies had issues trading at distressed levels at the various thresholds, a sharp decline from December's level of 97, according to a report published today by Standard & Poor's. The article, which is titled, "U.S. Distressed Debt Monitor," says at 1.3%, the distress ratio is considerably lower than the 5.7% reading in January of last year, as well as the 3.7% average recorded in full-year 2006, 6.1% in 2005, and 7.4% in 2004.
"It is interesting that, in ranking distressed sectors, automotive finished outside the top-three spots for the first time in several months, ranking fifth," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Much of the revaluation appears linked with news about Ford Motor Co., even though the outlook for the sector overall remains cloudy, with a preponderance of downside risks. However, the retail/restaurants, health care, and consumer products sectors saw the largest increase in the share of distressed credits relative to December."
Overall, the relative distribution of distressed issues is more evenly spread among the top-seven distressed industries. The retail/restaurants, health care, and consumer products sectors saw the largest increases in the share of distressed credits since December 2006. Distress within certain sectors, such as forest products and building materials, was narrowly contained with only one issuer trading at conventional distressed levels. Other sectors, such as banks and utilities, had no issues trading in the distressed range in mid-January. Sectors that saw the greatest declines in share of total distressed credits relative to one month ago were chemicals, packaging, and environmental services, and automotive.
The distress ratio--defined as the number of high-yield securities trading at spreads more than 1,000 bps relative to Treasuries divided by total speculative grade--continued to decline in 2006 after a period of stabilization in 2004 and 2005. Ms. Vazza notes that at, "1.3% in January 2007, the distress ratio has fallen to a new record low since the series began in October 1990, continuing the decline started in February of last year, and in line with expectations, the majority of distressed credits were concentrated in the lowest-rating categories, with the 'CCC' category constituting 59% of total speculative-grade distressed credits."
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