Bangkok--24 Aug--Standard & Poor's
Eight global corporate issuers defaulted this week, bringing the 2009 year-to-date tally to 205 issuers--nearly 4x the 54 defaults at this time in 2008, said an article published today by Standard & Poor's.
Six of this week's defaulters were based in the U.S., and the remaining two defaults came from Europe, according to the article, titled "Global Corporate Default Update (Aug. 14 - 20, 2009) (Premium)." The default tallies by region now stand at 146 issuers in the U.S., 13 in Europe, 33 in the emerging markets, and 13 in the other developed region (Australia, Canada, Japan, and New Zealand).
Reasons for default this week were mixed, with three distressed exchanges, three missed interest payments, one issuer placed into receivership, and one foreign bankruptcy. The number of distressed exchanges has soared this year, with the current tally of 66 issuers at more than 4x the full-year 2008 total and nearly 17x the count of four issuers in 2007.
"Missed interest payments are now the top reason for default so far this year, accounting for 70 defaulted issuers, followed by distressed exchanges," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "The number of bankruptcy filings also has surged, with 53 issuers so far this year having filed for bankruptcy protection, which surpasses 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%), 12% had recovery ratings of '4' (average recovery prospects of 30%-50%), and 11% had recovery ratings of '3' (meaningful recovery prospects of 50%-70%). And for the remaining two rating categories, 11% of issues had recovery ratings of '2' (substantial recovery prospects of 70%-90%) and 10% of issues had recovery ratings of '1' (very high recovery prospects of 90%-100%).
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect, at www.ratingsdirect.com. 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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