Bangkok--6 Aug--Moody's
Default rates by rating category and average recovery rates for corporate issuers in the Asia-Pacific excluding Japan region have been similar to those of issuers in other regions around the world, says Moody's Investors Service in an updated study of the historical credit performance of Asia-Pacific ( excluding Japan) corporate issuers.
"For several years before 2008, both globally and in the Asia-Pacific region, ratings upgrades overwhelmingly exceeded downgrades," said Moody's Analyst Elena Duggar, author of the report. "However, as the financial crisis spread globally, the credit cycle in Asia-Pacific turned on a downward path beginning in the second half of 2008, with rating downgrades exceeding upgrades. This negative rating trend has been consistent with a gradual softening in credit quality and a growing number of defaults globally."
With liquidity and funding pressures on corporations mounting, the number of defaults in the Asia-Pacific region rose to 14 in 2008-H12009 in a trend that follows four years of a benign environment in which there were no defaults by rated issuers in the region. The 14 defaulters, including eleven rated by Moody's with the remaining three unrated, defaulted on US$3.1 billion of debt during 2008-H1 2009. The default volume in the first half of 2009, of US$2.8 billion, already exceeds the highest annual default volume in the region since 2001, the aftermath of the Asian financial crisis of 1997-1998.
The Asia-Pacific (ex-Japan) component of Moody's-rated corporate universe has expanded dramatically over the past 18 years, from 68 rated bond and loan issuers in 1990 to 356 issuers in 2009. At the same time, the share of speculative-grade issuers increased from virtually zero to over one-fifth of the total.
"The rating distribution of Asia-Pacific corporate issuers differs significantly from that of the global universe of issuers," said Duggar, "with the Asia-Pacific region having a greater share of higher-rated corporate bond and loan issuers. As a result, when aggregating across all rated issuers, overall historical default rates are slightly lower in the Asia-Pacific region than globally."
The report "Default and Recovery Rates of Asia-Pacific Corporate Bond and Loan Issuers, Excluding Japan, 1990-H1 2009" is available at moodys.com.