Bangkok--8 Dec--Standard & Poor's
Four global corporate issuers defaulted since our previous default update, published on Nov. 20. This brings the 2009 year-to-date tally to 251 defaults--the highest total since our series began in 1981, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (Nov. 20 - Dec. 3, 2009) (Premium)."
The previous high, which was reached in 2001 (the most recent recession), was 229. By comparison, the current total of 251 defaults is roughly 2.5x the 101 defaults at this time in 2008, when defaults began to pick up considerably. Of the defaults since our previous report, two were based in the U.S., one in the emerging markets, and one in the other developed region (Australia, Canada, Japan, and New Zealand), bringing the 2009 default tallies by region to 183 issuers in the U.S., 18 in Europe, 35 in the emerging markets, and 15 in the other developed region.
"Two of the most recent defaults were the results of distressed exchanges, one was due to a payment suspension on specific notes, and one was the result of a missed interest payment," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "So far this year, distressed exchanges lead the default charge with 91 defaults, followed by missed interest and/or principal payments with 84 defaults and bankruptcy-related filings with 60 defaults."
Despite unprecedented turbulence in the credit markets and record-high default volume since 2008, the ability of corporate credit ratings to serve as an effective measure of relative default risk remains intact. This is evidenced by several factors, such as 87% of the issuers that have defaulted this year were rated speculative grade ('BB+' and lower) prior to default, investment-grade-rated issuers ('BBB-' and above) have a 99% survival rate within a one-year time horizon, and the majority of defaults this year stem from the weakest end of the credit spectrum, known as weakest links. Globally, 278 issuers are weakest links (entities rated 'B-' and lower with a negative outlook or ratings on CreditWatch negative), and the regional distribution of weakest links closely mirrors the default experience so far 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%).
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect on the Global Credit Portal atwww.globalcreditportal.com and to RatingsDirect at www.ratingsdirect.com. 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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