Kamakura Reports Another Fall in Global Corporate Credit Quality in November

2 December 2008

Kamakura Corporation announced Monday that the Kamakura index of troubled public companies deteriorated again in November, the 15th decline in credit quality in the last 16 months. The Kamakura global index of troubled companies increased to 22.6% of the public company universe from 22.0% of the universe in October. The all-time high in the index was 28%, recorded in September 2001. At the 22.6% level, the index shows that credit conditions are better than only 6.3% of the monthly periods since the start of the index in January, 1990. The all-time low in the index was 5.4%, recorded in April and May, 2006. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. The index covers more than 21,000 public companies in 30 countries using the fourth generation version of Kamakura's advanced credit models.

"On August 1, Kamakura reported that Downey Savings and FNMA were among the five rated companies with the largest one month jumps in short term default risk,” said Warren Sherman, Kamakura President and Chief Operating Officer. "FNMA was of course placed in receivership in September and Downey filed for bankruptcy last week. This month, among rated public companies, the companies showing the sharpest rise in short term default risk were Spectrum Brands, Regent Communications, Sirius XM Radio, and Champion Enterprises. In November, the percentage of the global corporate universe with default probabilities between 1% and 5% increased very dramatically by 0.1% to 13.3%. The percentage of companies with default probabilities between 5% and 10% was unchanged at 4.2% of the universe in November. The percentage of the universe with default probabilities between 10 and 20% was also unchanged in November at 2.8% of the universe. The percentage of companies with default probabilities over 20% was up 0.3% to 2.3% of the total universe in November."

The Kamakura troubled company index is a global index covering 30 countries. The index uses 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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