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Back to all Kamakura Corporation announcements

Global Credit Quality Declines in May from Record Levels in April

Kamakura Troubled Company Index Up to 5.7%

HONOLULU, June 1, 2006: Kamakura Corporation reported Thursday that its monthly global index of troubled companies worsened to 5.7% of the global corporate universe in May, an increase from the record low 5.5% set in April. Credit conditions in May, however, were better than 97% of the monthly periods over the last 16 years, when the troubled company index averaged 13.5%. Kamakura defines a troubled company as a company whose default probability is in excess of 1%. The all time high of the index was 28%, reached at the peak of the last recession in September, 2001. Kamakura expanded the index beginning in January to a global index covering 16,000 public companies in 29 countries using the fourth generation version of Kamakura's advanced credit models.

"Credit conditions continue to be excellent, but we may well be at the turning point," said Warren Sherman, Kamakura President and Chief Operating Officer. "The next few months will confirm whether April was the peak of this credit cycle. The number of companies with default probabilities between 1% and 5% increased slightly in May to 4.1% of the global public company universe. Companies with default probabilities between 5 and 10% increased by 0.1% to 0.9% of the universe. Companies with default probabilities between 10% and 20% remained steady at 0.5% of the universe. The number of global companies with default probabilities over 20% also remained unchanged at 0.2% of the universe."

Beginning in January 2006, 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, Luxembourg, Malaysia, Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.