Bangkok--20 Aug--Standard & Poor's
The number of global weakest links continued to decline to 278 as of Aug. 12, 2009, from 285 in July and a record high of 300 in April. The decline was largely attributable to the sharp rise in defaults, many of which were weakest links, said an article published today by Standard & Poor's.
The 278 weakest links have combined rated debt worth $302.4 billion. By sector, media and entertainment, forest products and building materials, banks, and retail/restaurants 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 with negative implications, and they are at greater risk of default.
Corporate defaults continue to rise rapidly in 2009, already surpassing the number in all of 2008. Through Aug. 12, 2009, 201 issuers defaulted, affecting debt worth $453.1 billion. By comparison, 126 defaults were recorded in all of 2008, affecting debt worth $433 billion.
"Negative outlooks and CreditWatch listings serve as good leading indicators of actual downgrades," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "The one-year default rate for weakest links was, on average, 5.8 times higher than for all issuers rated speculative grade from 1999 through June 2009 and was 14 times higher than in 2007, when the corporate speculative-grade default rate was near historical lows."
The 12-month-trailing global corporate speculative-grade bond default rate increased to 8.58% in July 2009 from 8.25% in June and is now more than 10x the 25-year low of 0.79% recorded in November 2007. The U.S. speculative-grade corporate default rate increased for the 20th consecutive month, reaching 9.37% in July 2009, up from 9.24% in June 2009 and now also almost 10x the level at year-end 2007. The default rate in Europe also increased to 6.12% from 5.13%, while the emerging markets default rate rose to 6.7% from 6.48%.
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.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760