Bangkok--24 Jul--Standard & Poor's
By June 2010, we expect the U.S. corporate speculative-grade default rate to fall slightly from its peak in the previous quarter and reach 13.9%, said an article published today by Standard & Poor's Global Fixed Income Research Group. This represents a slight moderation from our baseline projection of 14.3% in March 2010.
These projections represent a near 13% increase from the trough of the default rate in December 2007, the highest rate of increase observed in any prior default rate cycle since the start of our series in 1981, according to the article, titled "U.S. Corporate Default Rate Expected To Inch Lower To 13.9% By June 2010 After Peaking In First-Quarter 2010."
"The considerable volume of defaults that have materialized, which we expect to continue, should partially alleviate the default pipeline by the middle of 2010," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Nonetheless, our forecasted default rate of 13.9% is still higher than any observed historical level."
"In line with previous cycles, we expect defaults to continue to escalate even after the economy bottoms out in third-quarter 2009 and through the initial stages of an economic recovery," said Ms. Vazza.
In the second quarter of 2009, the total number of corporate casualties in the U.S. continued to increase--in line with expectations--to 82 issuers. Of those defaulters, 76 were rated speculative grade. This is nearly 4x the number recorded a year earlier. Expressed as a share of the rated universe, the trailing-12-month U.S. corporate speculative-grade default rate at the end of the second quarter was 9.25%, more than 4.5x higher than the 2.01% in second-quarter 2008. Since January, default rates have exceeded their long-term average (1981-2008) of 4.35%--after having remained below the average for 56 months.
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Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760