Bangkok--30 Apr--Standard & Poor's
As the number of corporate defaults reached an all-time high in 2009, Standard & Poor's Ratings Services' ratings continued to perform their important function of accurately assessing relative credit risk around the world, said an article published today by Standard & Poor's Global Fixed Income Research.
The article, titled "Standard & Poor's Corporate Ratings Continued To Measure Relative Risk Effectively In A Year Of Record Defaults," presents the findings of our default study. We identified a clear and consistent correlation between ratings and defaults: the higher the rating, the lower the observed frequency of default. We also found that this holds true over longer time spans.
"A total of 264 global corporate issuers defaulted in 2009, the highest annual total since our database began in 1981," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The par amount affected was a series high of $627.7 billion."
"Notwithstanding the elevated levels of stress, investment-grade-rated issuers continued to post lower default rates than their speculative-grade counterparts," said Ms. Vazza. "Between 1981 and 2009, the five-year average cumulative default rate was 1.25% for investment-grade corporate issuers and 17.9% for speculative-grade issuers."
Transition matrices show that investment-grade-rated issuers display greater credit stability than their speculative-grade counterparts do. An analysis of transition rates during the four quarters ended December 2009 found that rating behavior in this period generally remained consistent with long-term trends.
In addition to higher default rates and less stability, speculative-grade ratings are usually associated with shorter times to default than are investment-grade ratings. We've found the same relationship when the time to default is referenced back to the original rating assigned.
The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. 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.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760