Kamakura Reports Global Credit Quality Dropped Again in July

4 August 2008

Kamakura Corporation announced Monday that its monthly index of troubled public companies showed another sharp decline in global corporate credit quality in July. The Kamakura index has shown declines in credit quality in 11 of the last 12 months. Kamakura reported that troubled companies in July make up 13.9% of the global public company universe, up from 13.2% in June. This is the highest level for the Kamakura index since August, 2003. At the 13.9% level, the index shows that credit conditions are better than only 39.1% of the monthly periods since the start of the index in January, 1990. The all-time high in the index was 28.0%, reached in September 2001, and the all-time low was 5.4%, recorded in April and May, 2006. Kamakura defines a troubled company as a company whose default probability is in excess of 1%. The index covers more than 20,000 public companies in 30 countries using the fourth generation version of Kamakura's advanced credit models.

"The three companies showing the largest rises in default probabilities among rated companies during the month were R. H. Donnelley, Dollar Thrifty Automotive, and Scottish Re Group," said Warren Sherman, Kamakura President and Chief Operating Officer. "In July, the percentage of the global corporate universe with default probabilities between 1% and 5% increased 0.2% to 9.5%. The percentage of companies with default probabilities between 5% and 10% was up sharply, rising 0.3% to 2.2% of the universe in July. The percentage of the universe with default probabilities between 10 and 20% was unchanged at 1.2% of the universe. The percentage of companies with default probabilities over 20% also remained unchanged at 0.9% of the total universe in July."

Beginning in January 2006, Kamakura moved to a global index covering 30 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, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

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