Bangkok--25 Mar--Standard & Poor's
After a protracted period of economic and financial stress that began in the second half of 2007, credit conditions have become much more favorable so far in 2010, said an article published March 23, 2010 by Standard & Poor's.
The speculative-grade corporate spread is now lower than at any point in 2009, closing at 602 basis points (bps) on March 15. Along with this, the distress ratio is at 9.7% as of March 15, down from 12.7% in February, according to the article, titled "U.S. Distressed Debt Monitor: Distress Ratio Drops To 9.7% In March (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 high technology, media and entertainment, and insurance sectors are posting the highest debt-based distress ratios, at 32.3%, 21.9%, and 21%, respectively," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
"The debt-based distress ratio for high technology is considerably higher than its traditional, issue-based measure, revealing that a disproportionate amount of speculative-grade debt in this sector is attributable to distressed companies," said Ms. Vazza. "Five debt issues from First Data Corp., which total $9.2 billion, are responsible for a majority of the distressed issues in the high-tech sector this month."
Among distressed bonds, the total number of companies with issues trading with spreads of 1,000 bps and higher is currently 89. This is down from 114 in February and is the lowest level since December 2007. With a decrease in the distress ratio, the amount of affected debt also fell--to $47.7 billion from $62.4 billion this past month.
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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