Bangkok--2 Feb--Standard & Poor's
Three more issuers defaulted this week, two U.S. companies and one based in China, bringing the tally of global corporate defaults to 19 so far this year, said an article published today by Standard & Poor's.
Of the three most recent defaults, two are forest products and building materials companies, Neo-China Land Group (Holdings) Ltd. and Smurfit-Stone Container Corp., and the other is a chemicals, packaging, and environmental services company, Foamex L.P., according to the article, titled "Global Corporate Default Update (Jan. 23 - 29, 2009) (Premium)."
Both of these sectors have exhibited a relatively extreme level of distress for several months, with 79% of speculative-grade-rated forest products and building materials companies and 66% of speculative-grade-rated chemicals, packaging, and environmental services companies trading at or above 1,000 basis points over treasuries.
The precipitous increase in defaults reflects a pronounced decline in economic fundamentals and earnings prospects, as well as the continued credit freeze, effectively halting lending to speculative-grade borrowers. "A large number of defaults likely will be concentrated in the first two or three quarters of 2009 as a result of these factors, coupled with distressed exchange offers," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
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