Bangkok--23 Nov--Standard & Poor's
Continuing its descent in 2009, Standard & Poor's distress ratio has hit its lowest point in 17 months, reaching 17% as of Nov. 16, said an article published November 19, 2009 by Standard & Poor's, titled "U.S. Distressed Debt Monitor: Distress Ratio Declines Again In November (Premium)." This is down from 18.7% in October.
"This decrease in distress is coming at a time when corporate bond spreads are remaining relatively stationary," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The speculative-grade corporate bond spread was at 705 basis points on Nov. 16, down only slightly from 708 basis points a month earlier."
Standard & Poor's distress ratio is defined as the number of distressed securities divided by the total number of speculative-grade-rated issues. Distressed credits are speculative-grade-rated issues that have option-adjusted spreads of more than 1,000 basis points (bps) relative to Treasuries.
Among distressed bonds, the total number of companies with issues trading with spreads of 1,000 bps and higher is currently 140, down from 151 in October.
With distress still at elevated levels, recovery prospects remain low. In November, 73% of all distressed issues fall into the lowest rating categories ('5' or '6'), indicating only negligible to modest recovery in the event of default. In addition, 80% of all distressed issues are either unsecured or subordinated notes.
With a decrease in the distress ratio, the amount of affected debt also fell--to $81.2 billion from $89.4 billion this past month. Based on debt volume, the finance companies, media and entertainment, and high technology sectors together accounted for 61.7% of the total debt outstanding.
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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