Global Credit Quality Falls in July

Honolulu - 31 July 2007

Kamakura Troubled Company Index Rises Modestly

Kamakura Corporation announced today that its monthly global index of troubled companies rose modestly in July to 6.5% of the global public company universe, an increase of 0.2% from June. The troubled company index has varied in range from 5.4% and 7.3% since November 2005. The modest rise in the number of troubled companies contrasts with the sharp rise in credit spreads, which reflect market liquidity and macro-economic factors above and beyond the default probability of the underlying corporate credit. The 17 year low point for the Kamakura troubled company index was 5.4% in March-May 2006. The 17-year high in the index was 28%, reached in September 2001, the worst part of the last recession. July 2007 global credit quality was better than 95.2% of the monthly periods since January 1990, down modestly from an 96.7% rank in June. The average value of the index has been 13.5% over the last 17 years. Kamakura defines a troubled company as a company whose default probability is in excess of 1%. The index now covers more than 19,200 public companies in 29 countries using the fourth generation version of Kamakura's advanced credit models.

"Credit spreads continue to widen but the Kamakura troubled company index shows that actual default rates remain very low by historical standards," said Warren Sherman, Kamakura President and Chief Operating Officer. "Longer term default probabilities are rising for many companies, consistent with market expectations that we are moving into the more difficult phase of the credit cycle. Short term credit risk, which is what the troubled company index measures, remains low even after the tumultuous events of the past few weeks. The percentage of the global corporate universe with default probabilities between 1% and 5% increased from 4.4% of the universe in June to 4.7% of the universe in July. The percentage of companies with default probabilities between 5% and 10% remained unchanged at 0.9% of the universe. The percentage of the universe with default probabilities between 10 and 20% was also unchanged at 0.6% of the universe. The percentage of companies with default probabilities over 20% declined in July by 0.1% to 0.3% of the total 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, Luxemburg, Malaysia, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

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