Kamakura Reports Another Sharp Decline in Global Corporate Credit Quality in August

1 September 2008

Kamakura Corporation reported Tuesday that its monthly index of troubled public companies indicated still another steep decline in global corporate credit quality in August. The Kamakura index has now shown declines in credit quality in 12 of the last 13 months. Kamakura’s index revealed that troubled companies in August make up 14.8% of the global public company universe, up significantly from 13.9% in July. The 14.8% value for the Kamakura index is the highest since June, 2003. At the August level, the index shows that credit conditions are better than only 34.4% 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 short term 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 short term default probabilities among rated companies during the month were Chesapeake Corporation, Tronox Inc., and Fuji Electric Holdings Co. in Japan," said Warren Sherman, Kamakura President and Chief Operating Officer. "In August, the percentage of the global corporate universe with default probabilities between 1% and 5% increased dramatically by 0.6% to 10.1%. The percentage of companies with default probabilities between 5% and 10% was up 0.1% to 2.3% of the universe in August. The percentage of the universe with default probabilities between 10 and 20% was up sharply, rising 0.3% to 1.5% of the universe. The percentage of companies with default probabilities over 20% was up 0.1% to 1.0% of the total universe in August."

Beginning in January 2006, Kamakura has 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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