Bangkok--17 Oct--Standard & Poor's
Standard & Poor's expects the rate of default in the U.S. speculative-grade segment to increase materially in the next 12 months, reaching 7.6% by September 2009, the highest in nearly six years, said a report published today.
The spread of tumult across a variety of markets including, but not limited to, interbank lending, bonds, and equities, has been countered with aggressive government intervention. But, we do not expect the turmoil to pass without incident for a broader swathe of corporations and the economy in general.
The number of corporate casualties is increasing in the U.S. in line with expectations, but it still remains relatively limited considering the financial upheaval in the third quarter. A total of 24 defaults were recorded during the most recent quarter in the U.S., compared with 20 in the second and 16 in the first, according to the article, titled "Financial Tumult Pellets Corporates, Exacerbates Default Outlook Threefold."
"More trouble lies ahead, and we expect defaults to continue to gain momentum in the next 12 months," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "We have substantially raised our baseline default expectations for the U.S. speculative-grade segment, in line with more pronounced weakness in economic expectations."
In our baseline scenario (to which we've assigned a 60% probability), we expect the U.S. speculative-grade default rate to escalate to a mean forecast of 7.6% in the next 12 months (through September 2009), with a one-standard-deviation range of 6.5%-8.7%. This predicted range is multiples higher than the 2.68% trailing-12-month default rate observed in September 2008 and the 25-year low of 0.97% in December 2007.
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]. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. 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