Kamakura Credit Index Close to All Time “Best Conditions”
HONOLULU, February 8, 2006: Kamakura Corporation announced today that its monthly global index of troubled companies improved in January and is close to its all time record for best credit conditions. Kamakura defines a troubled company as a company whose default probability is in excess of 1%. Kamakura has expanded the index beginning this month to a global index covering 16,000 public companies in 29 countries using the most recent version of Kamakura’s advanced credit models. The index fell to 6.9% of the global public company universe in January from 7.2% in December and 8.4% in October. The all time low in the index was 5.9% in March 1994. The all time high of the index was 28%, reached at the peak of the last recession in September, 2001.
“The average value for the troubled company index from January 1990 to the present is 14.2%,” said Warren Sherman, Kamakura President and Chief Operating Officer. “The index value for January means that credit conditions are currently better than 96% of the 15 year historical period covered by the index. The number of companies with default probabilities between 1% and 5% remained unchanged in January at 4.6% of the universe. Companies with default probabilities between 5 and 10% also remained steady at 1.0% of the universe. Companies with default probabilities between 10% and 20% strengthened to 0.7% of the universe from 0.9% in December. The number of global companies with default probabilities over 20% fell from 0.7% to 0.6% of the universe.”
Beginning in January, Kamakura has moved to a global index covering 29 countries using the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.