Kamakura Corporation reported Tuesday that the Kamakura index of troubled public companies fell 66 basis points in April to 4.92%. The index set an all-time low of 4.36% on December 17, 2010. The index was quite stable during the month which contrasts sharply with the considerable intra-month volatility that was experienced in March as a result of the earthquake, tsunami and subsequent Fukushima nuclear power plant crisis. Tokyo Electric Power Company continues to be the firm with the worldâs highest one-month default risk among rated companies.
The Kamakura troubled company index measures the percentage of 29,400 public firms in 37 countries that have annualized 1 month default risk over one percent. Beginning with the November 2010 index value, the Kamakura troubled company index is now based on the version 5.0 default models from Kamakura Risk Information Services. Previously, the index was reported using the KRIS version 4.1 models. The version 5 models were estimated over the period from January 1990 to December 2008 and therefore capture the key events of the credit crisis in the fall of 2008.
Kamakuraâs index had reached a recent peak of 25.57% in November 2008. Credit conditions at the end of April were better than credit conditions in 99.24% of the months since the indexâs initiation in January 1990.
The average index value since January 1990 is 12.50%.
In April, the percentage of the global corporate universe with default probabilities between 1% and 5% was 4.09%, a decrease of 36 basis points. The percentage of companies with default probabilities between 5% and 10% was 0.57%, a decrease of 17 basis points. The percentage of the universe with default probabilities between 10 and 20% was 0.21% of the universe, flat with the prior month basis, while the percentage of companies with default probabilities over 20% was 0.05% of the total universe in April, a decrease of 2 basis points.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Wednesday, âAmong the 2,144 firms in the KRIS corporate universe with legacy ratings, only 12 firms showed increases in 1 month annualized default risk of more than 60 basis points. Four of them were Japanese companies, five were financial related firms operating in Ireland, Italy and Greece, and there was only one firm headquartered in the United States operating in the marine transport industry. Of the remaining two firms on this list one was a Canadian paper company and the other was a Mexican baker. These results continue to reflect the fact that the balance sheets of most corporations remain strong and problem situations continue to be firm specific or tied to specific global events.â
Beginning in November, 2010, the Kamakura index uses 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 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.