Kamakura Reports Improvement in Corporate Credit Quality
Kamakura Troubled Company Index Declines 1.14% to 6.50% in December Kamakura Corporation reported Thursday that the Kamakura index of troubled public companies improved, falling 1.14% to 6.50% in December. The index has deteriorated in six of the last eight months. The index hit an intra-month high of 7.47% on December 2 before improving to an
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Editorial Team
- January 5, 2012
- 3 minutes
Kamakura Troubled Company Index Declines 1.14% to 6.50% in December
Kamakura Corporation reported Thursday that the Kamakura index of troubled public companies improved, falling 1.14% to 6.50% in December. The index has deteriorated in six of the last eight months. The index hit an intra-month high of 7.47% on December 2 before improving to an intra-month low of 6.04% on December 23. At the 6.50% level, corporate credit quality is at the 86th 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 55.32% up 11.97 basis points.
In December, the percentage of the global corporate universe with default probabilities between 1% and 5% was 5.48%, a decrease of 71 basis points. The percentage of companies with default probabilities between 5% and 10% was 0.71%, a decrease of 24 basis points. The percentage of the universe with default probabilities between 10% and 20% was 0.23% of the universe, a decrease of 15 basis points, while the percentage of companies with default probabilities over 20% was 0.08% of the total universe in December, a decrease of 4 basis points.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Thursday, “While the Kamakura troubled company index improved in December, it should be noted that the index has deteriorated in six of the last eight months. Of the ten riskiest firms with legacy ratings at the end of December, two each are from Canada, Japan and the US while one each are from Great Britain, Ireland, Italy and Switzerland. Eight of the ten riskiest firms experienced increases in default risk over the past month. Delta Petroleum, which moved onto the troubled company index in March, defaulted during the month.”
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 12.33%. 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.
