Bangkok--24 Oct--Standard & Poor's
Through Oct. 15, 2008, 75 companies have defaulted globally, affecting debt worth $226 billion, said an article published today by Standard & Poor's. The rise in defaults in 2008 is in sharp contrast with trends in prior years, when only 22 defaults were recorded in all of 2007 and 30 in 2006.
Of the 75 defaults, 65 are domiciled in the U.S., two each are from Canada, Hong Kong, and Mexico, and one each is from France, Germany, Iceland, and the U.K. The U.S. also leads in the number of "weakest links," with 140 of the 181 entities, or 77.3%, according to the article, titled "Global Bond Markets' Weakest Links And Monthly Default Rates (Premium)." (Weakest links are issuers rated 'B-' or lower with either a negative outlook or ratings on CreditWatch with negative implications, and therefore are at greater risk of default.)
"In 2008, defaults have increased significantly in the U.S., but remain scarce elsewhere," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. The 12-month-trailing global corporate speculative-grade bond default rate increased to 2.04% in September from 1.84% in August, remaining below its long-term (1981-2007) average of 4.35% for 56 consecutive months.
"The U.S. speculative-grade default rate increased for the ninth consecutive month, reaching 2.68% in September, from 2.44% in August and a 25-year low of 0.97% at the end of 2007," said Ms. Vazza. The default rate in Europe fell marginally to 0.99% from 1.00%, while the emerging markets default rate rose to 0.17% in September from zero in August.
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.
RatingsDirect is the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. The standard version of this article is part of our standard Global Fixed Income Research content. The premium version contains expanded analysis of the article's most significant points, typically broken out by sector and region. Also in the premium version are in-depth charts and tables, the underlying data of which are available for download. 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