U.S. Corporate Credit Quality Slips in October - Merck Leads Upward Trend in Default Probabilities

HONOLULU, November 3, 2004: Kamakura Corporation reported today that its monthly index of troubled companies in the United States increased for the third consecutive month, rising 0.2% in September to 14.6% of the public company universe. Kamakura classifies any company with a default probability of more than one percent as troubled. Among highly rated companies, AAA-rated Merck & Co. (symbol MRK) saw its default probabilities jump 50-150 basis points over the course of the month. Generally speaking, the increase in Kamakura's troubled company index was due to an increase in companies with probabilities of failure between 10% and 100%. The Kamakura troubled company index hit a low of 11.1% in April, 2004.

"The October credit quality of public companies in North America was variable from week to week, but the downward trend in credit quality is clear," commented Dr. Donald R. van Deventer, Kamakura Chairman and Chief Executive Officer. "The number of companies with default probabilities between 1% and 5% stayed at 8.3% of the universe compared to September. Companies with default probabilities between 5 and 10% were also unchanged at 2.4% for October. Companies with default probabilities between 10% and 20% increased 0.1% to 1.5% of the universe. The riskiest firms in the universe, those with default probabilities over 20%, now total 2.4% of the universe, an increase of 0.1%."

Kamakura is offering free trials of its KRIS default probability service to qualified institutions. For more information on Kamakura's free trial offer please contact Kamakura at info@kamakuraco.com . More information can also be found on the Kamakura Corporation web site and in Advanced Financial Risk Management (John Wiley & Sons, 2004) by Kamakura's van Deventer, Kenji Imai, and Mark Mesler.

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