Bangkok--7 Feb--Standard & Poor's
The European speculative-grade corporate default rate ended 2006 at 2.07%, the highest rate by region on a 12-month trailing basis, according to an article published today by Standard & Poor's. The article, which is titled "Annual European Corporate Default Study And Rating Transitions," says that by contrast, speculative-grade default rates were 1.26% in the U.S. and 0.38% in the emerging markets at the end of 2006.
Four rated defaults were recorded in 2006 in Europe on debt worth US$266 (?205) million, three more than the single default in 2005 but well below the count recorded in 2001-2003. Globally, there were 29 defaults recorded in 2006 that affected rated debt worth US$7.1 (?5.5) billion.
"Concerns remain for a more meaningful increase in defaults in 2008," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "These concerns are based on an elevated proportion of low-grade issuance that began in late 2003. Rising leverage in 2006 has increased concern about rising default risk, even though the loosening of covenants has allowed many distressed entities to stay afloat."
Deteriorating credit quality in the speculative-grade segment remains a concern, with the share of 'B' rated issuers to total speculative grade having reached an 11-year high of 53% at the end of 2005 and remaining high at 52% in 2006 compared with 42% in 2004, 36% in 2003, and 30% in 2002. This is an early signal of potential default pressures ahead.
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