Kamakura Default Probabilities for WestPoint Stevens Hit 94% on Day Prior to Bankruptcy

Two Kamakura Default Probability Models Exceed 87%

HONOLULU, June 3, 2003: Kamakura Corporation announced today that its Kamakura default probability models performed exceptionally well in anticipating the June 1, 2003 bankruptcy of major textile firm WestPoint Stevens. Kamakura released results showing that its KDP-jc Jarrow-Chava "reduced form" default probability model reached 94% on Friday, May 30 and its KDP-jm Jarrow-Merton hybrid model reached 87% on the same day. May 30 was the last business day prior to the Chapter 11 bankruptcy filing by WestPoint Stevens.
"The Kamakura reduced form default probability model KDP-jc and the KDP-jm hybrid credit model were extremely accurate as 'early warning' indicators of both the bankruptcy and the ratings downgrade of WestPoint Stevens to CCC," said Donald R. van Deventer, Kamakura Chairman and Chief Executive Officer. "Version 2.2 of these models, released just last month, incorporates macro economic factors, financial ratios, and equity market data to provide the highest accuracy in the ordinal ranking of corporate credit risk that we have ever tested. The models certainly proved their worth in the WestPoint Stevens case."

Kamakura's default probability models have been adopted by hedge funds, banks, and other major institutional investors since Kamakura launched its Kamakura Risk Information Service KRIS-cr default probability service in November, 2002. All of the Kamakura credit models are upgraded semiannually to incorporate the latest developments in credit risk research. Each model upgrade is accompanied by Basel II credit model testing research results including the ROC accuracy ratio, the industry standard for testing credit model accuracy. Kamakura's most recent credit risk publication is Credit Risk Models and the Basel Accords by Kamakura Managing Committee members van Deventer and Kenji Imai.

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