Bangkok--24 Oct--Standard & Poor's.
After flirting with a 30% level last month, the Standard & Poor's distress ratio ballooned to 53.5% as of Oct. 15, said an article published today by Standard & Poor's.
This is the highest level seen since the series began in October 2002 and more than 42% higher than at the start of 2008, according to the article, titled "U.S. Distressed Debt Monitor: Distress Ratio Balloons To More Than 53% In October (Premium)." This increase runs alongside the continued rise in the speculative-grade spread, which hit 1,178 basis points (bps) on Oct. 15, up from 840 bps a month earlier. (Distressed credits are speculative-grade issues that have option-adjusted spreads of more than 1,000 bps relative to Treasuries.)
"When looking at the distress ratio based on outstanding debt, financial sectors such as banks, finance companies, and brokers show levels far in excess of all nonfinancial sectors, except for automotive," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. The debt-based measure is at 92.5% for finance companies, meaning that nearly 93% of the speculative-grade debt in this sector is attributable to companies trading at distressed levels. This compares with a conventional distress ratio of 81.7% for this sector.
Among distressed bonds, the total number of rated companies with issues trading with spreads of 1,000 bps and higher is currently 405, up from 221 in the past month.
In line with an increasing distress ratio, the amount of affected debt jumped up to an all-time high of $302.5 billion in October, up from $190 billion the previous month.
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