Bangkok--9 Nov--Standard & Poor's
One global corporate issuer defaulted this week, bringing the 2009 year-to-date tally to 239 issuers--roughly triple the 82 defaults at this time in 2008, said an article published today by Standard & Poor's.
This week's defaulter was based in Europe, bringing the default tallies by region to 175 issuers in the U.S., 16 in Europe, 34 in the emerging markets, and 14 in the other developed region (Australia, Canada, Japan, and New Zealand), according to the article, titled "Global Corporate Default Update (Oct. 30 - Nov. 5, 2009) (Premium)."
This week's default was a result of a distressed exchange, which ups the tally of defaults related to distressed exchanges to 85--the most cited reason for default this year.
Of the global corporate defaulters so far this year, 40% of issues with available recovery ratings had recovery ratings of '6' (indicating our expectation for negligible recovery of 0%-10%), 15% 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, 12% 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%).
The marked improvement in financial conditions has altered our expectations for corporate default rates within the one-year forecast horizon. The sharp decline in funding costs, the reopening of the bond markets (even for low-rated issuance), and the abatement of volatility are factors that will lower refinancing costs, even for low-rated issuers. As a result, our 12-month-forward baseline projection for the U.S. corporate speculative-grade default rate is now 6.9%. Our pessimistic and optimistic scenarios result in default rates of 9.9% and 5.5%, respectively. As of September 2009, the U.S. 12-month-trailing corporate speculative-grade default rate was 10.8%. Previously, we had stated our expectations for a swathe of defaults to occur in the first half of 2010. But now, we expect that many of the defaults might be postponed to later quarters beyond the 12-month forecast horizon. Our forecasts are based on quantitative and qualitative factors that we consider, including, but not limited to, Standard & Poor's proprietary default model for the U.S. corporate speculative-grade bond market.
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.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_
[email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]