Kamakura Troubled Company Index Increases 1.36% to 8.99% in May
NEW YORK, June 1, 2012: Kamakura Corporation reported Friday that the Kamakura index of troubled public companies rose, increasing 1.36% to 8.99% in May. The rise in the index reflects a decline in corporate credit quality, which has deteriorated in ten of the last thirteen months. The index hit an intra-month high of 9.02% on May 30 while having an intra-month low of 7.55% on May 2. There was upward bias in the index throughout the month. At the 8.99% level, corporate credit quality is at the 57th 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 and last month it was at the 69th percentile. Yell Group PLC had the world’s highest one-month default risk among rated companies with a default probability of 19.70%. Tokyo Electric Power Company was nationalized in May after having received at least 3.5tn Yen ($43 Billion) in state support since the tsunami.
In May, the percentage of the global corporate universe with default probabilities between 1% and 5% was 7.15%, an increase of 102 basis points. The percentage of companies with default probabilities between 5% and 10% was 1.29%, an increase of 27 basis points. The percentage of the universe with default probabilities between 10% and 20% was 0.45% of the universe, an increase of 6 basis points, while the percentage of companies with default probabilities over 20% was 0.10% of the total universe in May, a decrease of 1 basis point.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Friday, “We saw an almost continuous bias towards higher default probabilities over the past month. Nine of the ten riskiest firms experienced increases in default probability over that time. There was a marked shift in the makeup of the world’s riskiest firms with nine of the ten being from the European Continent and only one from the United States. There has been a pronounced worsening trend over the past thirteen months with an acceleration over the past two months that bears close monitoring”.