Bangkok--29 Apr--Standard & Poor's
The number of global weakest links increased to a record high of 300 as of April 22, 2009, as eroding credit quality leads to lower ratings and more entities with negative outlooks or with ratings on CreditWatch with negative implications, said an article published today by Standard & Poor's.
This is the 14th consecutive month that has seen an increase in weakest links. The 300 weakest links have combined rated debt worth $485.75 billion. By sector, media and entertainment, retail and restaurants, and forest products and building materials were the most vulnerable, with the highest concentrations of weakest links, according to the article, titled "Global Bond Markets' Weakest Links And Monthly Default Rates (Premium)."
Weakest links are defined as issuers rated 'B-' or lower with either a negative outlook or with ratings on CreditWatch negative, and they are at greater risk of default.
Corporate defaults continue to rise rapidly in 2009. Through April 22, 2009, 92 issuers defaulted, affecting debt worth $243.95 billion. By comparison, 126 defaults were recorded in all of 2008, affecting debt worth $433 billion.
The 12-month-trailing global corporate speculative-grade bond default rate increased to 4.92% in March 2009 from 4.28% in February and is now more than 6x the 25-year low of 0.79% recorded in November 2007. The U.S. speculative-grade corporate default rate increased for the 16th consecutive month, reaching 5.42% in March 2009, up from 4.9% in February and now about 5.5x the level from year-end 2007.
"We expect the U.S. corporate speculative-grade default rate to continue rising to an all-time high of 14.3% by March 2010," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Historically, defaults have continued to escalate even after signs of economic recovery," said Ms. Vazza. "This cycle will be no different. We expect the economy to bottom out in the third quarter of 2009, but defaults likely will be abundant past that time horizon."
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 Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this report by contacting the media representative provided.
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