Bangkok--17 Nov--Standard & Poor's
The number of global weakest links remains elevated, even as the economy starts to show signs of recovery. As of Nov. 11, 2009, there were 251 weakest links, which is down from the record high of 300 in April but higher than the 207 recorded one year ago, said an article published today by Standard & Poor's, titled "Global Bond Markets' Weakest Links And Monthly Default Rates (Premium)." The 251 weakest links have combined rated debt worth $268.44 billion.
Weakest links are issuers rated 'B-' and lower with a negative outlook or ratings on CreditWatch negative.
"The U.S. leads in the number of weakest links, with 172 of the 251 entities, or 69%," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "By sector, media and entertainment, forest products and building materials, and banks were the most vulnerable, with the highest concentrations of weakest links."
Corporate default rates across regions have risen significantly in 2009, reaching levels not seen since prior recessions. Through Nov. 11, 2009, 243 issuers defaulted, affecting debt worth $573.00 billion. By comparison, 126 defaults were recorded in all of 2008, affecting debt worth $433 billion.
"The 12-month-trailing global corporate speculative-grade default rate increased to 9.71% in October 2009 from 9.59% in September and is now more than 12x the 25-year low of 0.79% recorded in November 2007," said Ms. Vazza.
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 VIX volatility are factors that likely will lower refinancing costs, even for low-rated issuers. As a result, our baseline projection for the U.S. corporate speculative-grade default rate is 6.9% in September 2010.
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 by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
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