Bangkok--22 Dec--Standard & Poor's
As we near the end of 2009, what started out as a tumultuous year for borrowers is ending on a very optimistic note, said an article published today by Standard & Poor's.
The speculative-grade corporate spread is now at its lowest point of the year, closing at 643 basis points (bps) on Dec. 15. Following alongside this, the distress ratio is now below its long-term average--at 14.6% as of Dec. 15. This is down from 17% in November, according to the article, titled "U.S. Distressed Debt Monitor: A Declining Distress Ratio Portends A Brighter New Year (Premium)."
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 bps relative to Treasuries.
The bank, high technology, and oil and gas exploration and production sectors are posting debt-based distress ratios in excess of their traditional, issue-based distress measures--particularly within the bank sector. This reveals that a disproportionate amount of speculative-grade debt in this sector is attributable to distressed companies.
"With a decrease in the distress ratio, the amount of affected debt also fell, to $63.9 billion from $81.2 billion this past month," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "Based on debt volume, the finance companies, media and entertainment, and retail/restaurants sectors together accounted for 58.5% 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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