Improvement in U.S. Corporate Credit Quality Loses Momentum. Kamakura Reports Stabilizing Corporate Credit Quality, Urges Caution

HONOLULU, March 1, 2004: Kamakura Corporation reported today the number of troubled companies in the United States remained essentially unchanged in February compared to January, ending a steady 18-month trend of improving credit quality. Kamakura rated 11.5% of public companies in the "high risk" category at the end of February, down only 0.2% from a month earlier. Kamakura defines a company as "high risk" if its default probability over the next year is more than one percent.

Kamakura's analysis showed that 5.6% of the North American universe of public companies had an annual probability of default between 1% and 5% on February 29, unchanged from January. Companies with default probabilities between 5% and 10% were 1.7% of the North American universe, and companies in the 10% to 20% range were another 1.2% of the universe, also unchanged compared to January. Kamakura's analysis showed that 3.0% of North American corporations were in the very high risk category, defined as companies with default probabilities between 20% and 100%. This is a decrease of 0.2% over the month-earlier figure.
"This is the first significant pause we have had in improving corporate credit quality in the last 18 months," said Dr. Donald R. van Deventer, Kamakura Chairman and Chief Executive Officer. "Over the next few months, it will become clear whether we have reached the peak in corporate credit quality with this month's figures. Clearly, a cautious approach to credit extension looks prudent if this is indeed a plateau in corporate credit quality."