Bangkok--31 Jul--Standard & Poor's
American Safety Razor Co., a U.S.-based consumer products company, filed for Chapter 11 this week, raising the year-to-date 2010 global corporate default tally to 46, said an article published today by Standard & Poor's, titled "Global Corporate Default Update (July 23 - 29, 2010) (Premium)."
By region, the current year-to-date default tallies are 33 in the U.S., two in Europe, five in the emerging markets, and six in the other developed region (Australia, Canada, Japan, and New Zealand).
So far this year, distressed exchanges account for 15 defaults, missed interest or principal payments are responsible for 13, Chapter 11 filings account for 12, regulatory directives and receiverships are responsible for one each, and the remaining four defaulted issuers are confidential.
Of the global corporate defaulters in 2010, 41% of issues with available recovery ratings had recovery ratings of '6' (indicating our expectation for negligible recovery of 0% to 10%), 13% of the issues had recovery ratings of '5' (modest recovery prospects of 10% to 30%), 8% had recovery ratings of '4' (average recovery prospects of 30% to 50%), and 21% had recovery ratings of '3' (meaningful recovery prospects of 50% to 70%). And for the remaining two rating categories, 15% of the issues had recovery ratings of '2' (substantial recovery prospects of 70% to 90%) and 3% had recovery ratings of '1' (very high recovery prospects of 90% to 100%).
In our view, a modest amount of maturing debt over the next four quarters is one of the key factors that should keep default rates low in the one-year forecast horizon, even though many speculative-grade issuers could have a tough time refinancing if financial conditions worsen materially. Our baseline projection for the U.S. corporate speculative-grade default rate in the 12 months ended in June 2011 is 2.8%, with alternative scenarios of 2.5% at the optimistic end and 4.5% at the pessimistic end. Our pessimistic scenario is the same as the long-term (1981 to 2009) average default rate. Our forecasts are based on quantitative and qualitative factors that we consider, including, but not limited to, Standard & Poor's proprietary default model for the U.S. corporate speculative-grade bond market.
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