Bangkok--23 Nov--Standard & Poor's
Five global corporate issuers defaulted this week, bringing the 2009 year-to-date tally to 247 issuers, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (Nov. 13 - 19, 2009) (Premium)."
By comparison, this tally is nearly triple the 87 defaults at this time in 2008 and is the highest annual global default total since our series began in 1981, even exceeding the 229 defaulted issuers in 2001 during the previous recession.
One of this week's defaults was based in Europe and the other four were based in the U.S., bringing the default tallies by region to 181 issuers in the U.S., 18 in Europe, 34 in the emerging markets, and 14 in the other developed region (Australia, Canada, Japan, and New Zealand). Please note that these figures were revised to include one U.S.-based corporate issuer that defaulted this past month after Standard & Poor's had withdrawn its ratings on the company.
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.
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