Bangkok--24 Jun--Standard & Poor's
After getting off to a heady start in 2010, the pace of the economic recovery has slowed recently, said an article published today by Standard & Poor's, titled "U.S. Distressed Debt Monitor: Distress Ratio Rises To 12.3% In June, Its Second Consecutive Monthly Increase (Premium)." Credit market indicators appear to have weakened in the past few weeks--likely stemming from worries that the debt problems in Europe will spread to the U.S.
As a result, the speculative-grade corporate spread is now at levels consistent with a recession. "After hitting a low of 537 basis points on April 26, the speculative-grade corporate bond spread reached 673 basis points as of June 15," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "Along with this, the distress ratio has risen to 12.3% in June from 9.4% this past month."
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.
Among distressed bonds, the total number of companies with issues trading with spreads of 1,000 bps and higher is currently 116. This is up from 92 in May though is still lower than 2009 levels.
With an increase in the distress ratio, the amount of affected debt also rose--to $72 billion from $56.2 billion this past month. Based on debt volume, the media and entertainment, high technology, and oil and gas exploration and production sectors accounted for 59.3% 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.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760