Kamakura Troubled Company Index Declines 0.99% to 6.23% in September
Kamakura Corporation reported Monday that the Kamakura index of troubled public companies closed the month of September at 6.23%. A decline in the index reflects improved credit quality. The index reflects the percentage of the Kamakura coverage universe that has a default probability over 1%. The index hit an intra-month high of 7.28% on September 4th, while the intra-month low of 6.05% was on September 20th.
On September 28th, the percentage of the global corporate universe with default probabilities between 1% and 5% was 5.31%, the percentage of universe with default probabilities between 5% and 10% was 0.64%, while the percentage between 10% and 20% was 0.23% and the percentage of companies with default probabilities over 20% was 0.05%. This represented qualitative improvements across the entire distribution of the index relative to their August values.
At 6.23%, the troubled company index is at the 90th percentile of historical credit quality (with 100 being best all time) over the period from January, 1990 to the present. HIBU PLC, formerly known as Yell Group, PLC continues to have the world’s highest one-month default risk among rated companies with an annualized default probability of 44.03%. Among the top ten riskiest firms, there were three from the U.S., two from Italy and one each from Finland, Great Britain, Ireland, Japan and Russia.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Monday, “The economic news continues to be mixed, while the US housing market recovery continues to show strength. Attention over the next few weeks will be on corporate earnings, the U.S. Presidential debates, news from Europe and economic news from China. Default risk continues to be company specific and widely dispersed.”
The Kamakura troubled company index measures the percentage of almost 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 12.17%. 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, and 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.