Kamakura Reports U.S. Corporate Credit Quality Stable in April; Kamakura Notes Slight Improvement in Most Troubled Credits

HONOLULU, May 5, 2004: Kamakura Corporation reported today that corporate credit quality in April stayed roughly unchanged, with 11.1 percent of the U.S. public company universe classified as "troubled" by Kamakura. Kamakura ranks all companies with default probabilities over one percent as troubled. The total number of troubled companies in the U.S. has remained roughly stable at about 11 percent of the total since January 23 of this year.

"The number of troubled companies with default probabilities between one and ten percent has now remained stable for more than three months, a plateau that follows steady improvement in corporate credit quality throughout 2003," said Dr. Donald R. van Deventer, Kamakura Chairman and Chief Executive Officer. "This month did see a decline in the percentage of most troubled companies, those with default probabilities over 20 percent, from 2.9 percent of the universe to 2.6 percent of the universe. This compares with 5.5 percent of the total universe in November 2002. The prolonged economic recovery is beginning to have a positive impact on even the most troubled companies."

Kamakura reported that 5.7 percent of the U.S. corporate universe had default probabilities of 1 to 5 percent in April, unchanged from March. The company said 1.6 percent of the U.S. corporate universe had default probabilities between 5 and 10 percent and 1.2 percent of the universe had default probabilities between 10 and 20 percent. These figures were roughly the same as the previous month.

Kamakura last week announced that it has added 32 million default probability correlations between all pairs of public companies in North America to its KRIS default probablitity service. These correlations are used by Kamakura clients to value first to default swaps, collateralized debt obligations, and fixed income portfolio credit risk. The correlation of default probabilities between companies both within the same industry and in different industries can be very high due to the common macro-economic factors which drive credit risk. Kamakura also supplies its clients with the credit model performance tests required under the New Capital Accord from the Basel Committee on Banking Supervision ("Basel II").

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