Bangkok--22 Sep--Standard & Poor's
An investigation of this year's corporate default statistics confirms that Standard & Poor's corporate credit ratings continue to demonstrate a clear correlation between ratings and observed default frequencies, said an article published today by Standard & Poor's Global Fixed Income Research.
"The higher the rating, the lower the observed frequency of default, and vice versa," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "Even amid the unprecedented turbulence and record-high default volume experienced since 2008, the ability of corporate ratings to serve as an effective measure of relative default risk remains intact."
Speculative-grade companies dominate the defaulter ranks. Of the 216 defaults recorded in the eight months ended Aug. 31, 2009, 87% (187 issuers) had an initial rating of 'BB+' or lower. When including the corporate default tally from 2008, speculative-grade-rated issuers account for 85% of the total 342 defaults, according to the article, titled "Global Credit Comment: Corporate Credit Ratings Effectively Measure Default Probability."
Of the defaulters in 2009, 186 issuers were rated 'BB+' or lower one year prior to default. Of these speculative-grade-rated companies, 57% had either a negative outlook or ratings on CreditWatch with negative implications a year prior to default.
By contrast, survival (nondefault) rates among investment-grade-rated companies are 99% or higher for all rating categories above 'BBB-' in the one-year horizon. This pattern holds true when the data are broken out separately for financials and nonfinancials.
The report is available to RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected]. 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:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760