Bangkok--15 Feb--Standard & Poor's
One global corporate issuer, Bahrain-based Gulf Finance House G.S.C., defaulted this week, bringing the 2010 year-to-date tally of global corporate defaults to 14, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (Feb. 5 - 11, 2010) (Premium)."
By region, the current year-to-date default tallies are 12 defaults in the U.S., one in the emerging markets, and one in the other developed region (Australia, Canada, Japan, and New Zealand). Please note that we have revised these figures to include four U.S.-based issuers that defaulted after Standard & Poor's withdrew its ratings on the companies and to exclude one issuer that does not meet our default criteria.
So far this year, distressed exchanges account for six defaults, and missed interest or principal payments and Chapter 11 filings are responsible for four defaults each.
"Our year-end 2010 baseline projection for the U.S. corporate speculative-grade default rate is now 5.0%, with alternative scenarios of 6.9% at the pessimistic end and 4.3% at the optimistic," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
The baseline is lower than the 6.9% projection we forecasted for the third quarter of 2010. This does not mean that corporate default risks are permanently lower. We note that the ranks of surviving low-rated companies remain large by historical standards. The extent of decline in risk premiums for lower-rated borrowers and the return of what we view as questionable practices in some recent deals--such as raising bond funds to pay out shareholder dividends or sponsors--further raise concerns that the optimism might be overdone. Without a revival in top-line earnings and growth, many of the surviving leveraged issuers originated during 2003-2007 could face renewed default risk beyond the forecast horizon unless they significantly reduce their debt burdens.
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 at www.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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