Kamakura Reports Sixth Deterioration in Corporate Credit Quality in Seven Months

New York - 1 December 2011

Kamakura Troubled Company Index Rises 0.38% to 7.64% in November NEW YORK, December 1, 2011: Kamakura Corporation reported Thursday that the Kamakura index of troubled public companies showed the sixth month of deterioration in the last seven months, rising 0.38% to 7.64% in November. The index hit an intra-month high of 8.10% just a few days before November month end. At the 7.64% level, corporate credit quality is at the 70th percentile (with 100 being best all time credit quality) over the period from 1990 to the present. In December, 2010, by contrast, the index was at the 99th percentile of credit quality. Tokyo Electric Power Company continues to be the firm with the world’s highest one-month default risk among rated companies, with a default probability of 41.70%.

In November, the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.19%, an increase of 37 basis points. The percentage of companies with default probabilities between 5% and 10% was 0.95%, an increase of 1 basis point. The percentage of the universe with default probabilities between 10% and 20% was 0.38% of the universe, a decrease of 1 basis point, while the percentage of companies with default probabilities over 20% was 0.12% of the total universe in November, an increase of 1 basis point.

Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Thursday, “The deterioration in the Kamakura troubled company index would have been considerably higher if not for the surge in stock prices world-wide on November 30. Only 31 of 2,201 firms with legacy ratings experienced an increase in default risk on November 30. Of the riskiest 14 firms with legacy credit ratings in October’s rankings, two of the three riskiest U.S. firms failed in November: General Maritime (November 15) and Trailer Bridge (November 16). Of the ten riskiest firms with legacy ratings at the end of November, 3 each are from Great Britain and Japan, and 4 of the 10 firms have investment grade ratings in spite of their extremely high default risk.”

The Kamakura troubled company index measures the percentage of more than 30,000 public firms in 37 countries that have annualized 1 month default risk over one percent. Kamakura’s index had reached a recent peak of 25.57% in November 2008. The average index value since January 1990 is 12.37%. Since November, 2010, the Kamakura index has used the annualized one month default probability produced by the KRIS version 5.0 Jarrow-Chava reduced form default probability model, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The version 5.0 model was estimated over the period from 1990 to 2008, so it includes the insights of the worst part of the recent credit crisis. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Greece, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, United Kingdom, and the United States.

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