Bangkok--20 Jul--Standard & Poor's
Three global corporate issuers defaulted this week, bringing the 2009 year-to-date tally to 181 issuers--nearly 4x the 46 defaults at this time in 2008, said an article published today by Standard & Poor's.
Two of this week's defaulters were based in the U.S. and one was based in Europe, bringing the default tallies by region to 130 issuers in the U.S., nine in Europe, 30 in the emerging markets, and 12 in the other developed region (Australia, Canada, Japan, and New Zealand).
The first default this week was a result of a distressed exchange, upping the distressed exchange tally to 51 issuers so far this year, according to the article, titled "Global Corporate Default Update (July 10 - 16, 2009) (Premium)." Distressed exchanges have surged this year, with the midyear 2009 tally at more than 3x the full-year 2008 total and 12x the count of four issuers in 2007.
The remaining two defaults resulted from restructuring--one Chapter 11 filing and one out-of-court restructuring. The 51 bankruptcy filings so far this year have surpassed the full-year 2008 total of 49 bankruptcy-related defaults. The sharp increase in corporate bankruptcies brings with it significant difficulties to private equity investors, particularly for those whose buyout activities in the past several years placed much of their risks squarely in the speculative-grade domain. Indeed, more than half of the defaulters this year either had or continue to have private equity involvement, which presents both challenges and opportunities to private equity investors during restructuring and reorganization.
Of the global corporate defaulters so far this year, 41% of issues with available recovery ratings had recovery ratings of '6' (indicating our expectation for negligible recovery of 0%-10%), 16% of issues had recovery ratings of '5' (modest recovery prospects of 10%-30%), 13% had recovery ratings of '4' (average recovery prospects of 30%-50%), and 10% had recovery ratings of '3' (meaningful recovery prospects of 50%-70%). And for the remaining two rating categories, 12% of issues had recovery ratings of '2' (substantial recovery prospects of 70%-90%) and 9% of issues had recovery ratings of '1' (very high recovery prospects of 90%-100%).
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